BankAmerica Corp., one of the giants of the bank mutual fund business, is engineering some big changes in the products it sells and the customers it reaches.
The San Francisco-based company plans an aggressive push into the retail side of the investment products business.
"We want to really continue to grow the retail side," said Debra McGinty-Poteet, managing director of BankAmerica's funds management unit.
Noting that about 95% of the bank's mutual fund assets come from institutional investors, she said, "Our goal is to get to 30% retail."
Expanding the Product Mix
At the same time, the bank is expanding its product mix, with the aim of bolstering sales of its proprietary funds. Plans call for the introduction of 18 new Pacific Horizon funds by the end of next year, boosting total offerings to 29.
The changes, BankAmerica executives say, could push total retail fund sales to $2 billion in 1993, far above previous levels notched by banks.
Till now, BankAmerica has built its $19.3 billion-asset mutual fund business chiefly through sales of money market funds to institutional clients.
But the record-low interest rates have whetted consumers' appetites for stock and bond mutual funds, shifting the action to the retail side of the market.
400 Investment Specialists
To lead its retail sales efforts, BankAmerica recently recruited John O. Myers, a veteran mutual fund executive from Boston-based Colonial Investments.
Mr. Myers oversees a sales force of 400 investment specialists, all experienced, full-fledged stockbrokers with Series 7 licenses from the National Association of Securities Dealers.
His first task in joining BankAmerica was to undertake a 100-day evaluation of the bank's investment products strategy. As his self-imposed deadline draws near, Mr. Myers says some key clements of a mission statement are beginning to take shape.
For one thing, he said, he is convinced that using Series 7 stockbrokers to sell mutual funds is the right way to go. Many banks prefer to train platform employees to sell mutual funds part time, typically by putting them through the less rigorous Series 6 exam.
"I'm really committed to a highly trained sales force focused on long-term relationships," Mr. Myers said. "I want to steer away from the somewhat opportunistic path of using thinly trained individuals."
Restraint on Proprietaries
In carrying out his mission, Mr. Myers will be working closely with Ms. McGinty-Poteet, who heads up the unit that creates and manages proprietary funds. In BankAmerica parlance, Mr. Myers is her "client," because he is responsible for retailing the funds.
They are in absolute agreement on a key point: The bank must bolster retail sales of the proprietary funds, but not go too far in that direction.
The Pacific Horizon funds account for about 20% of sales. The BankAmerica executives think the figure should be 40% or 50%, but no higher.
In fact, products from four mutual fund companies - American Funds, Franklin Resources, Colonial, and Putnam Financial Services - are currently marketed to retail customers alongside the Pacific Horizon funds.
"Customers need to be served with an array of choices," Mr. Myers said. "We offer no incentive payout for selling the in house fund group.
"We have to earn our position alongside the other products," Ms. McGinty-Poteet added. "There's no free lunch."
Money market funds are likely to remain the centerpiece of the fund colossus at BankAmerica, which already has a commanding presence in the market.
Its Prime Fund, with $14 billion in assets, has consistently been a top performer, and that is crucial to sales.
"When it comes to money market funds, sometimes the bottom of the pack and the top of the pack are only divided by 10 or 15 basis points" in return, Ms. McGinty-Poteet said. "But that is huge."
"With money market funds, you have to be a real street fighter out there," she said.
Aiming High
Ultimately, BankAmerica hopes to become nothing less than the very model of a successful bank mutual fund program.
"We want to be among the biggest, best-executed delivery systems in the country," Mr. Myers said.
Of course, the executives also have some clear profit targets.
"The corporate goal is to have this business at $100 million total contribution [to profits], after taxes," said Ms. McGinty-Poteet. All of BankAmerica earned $1.492 billion for 1992.
As a newcomer to banks, Mr. Myers is impressed by the trust they are accorded by their customers. "Brokers are now realizing that banks are where the action is," he said.
But, he added, it's only a matter of time before mutual fund companies start to apply some heat.
"Banks need to be prepared for that competition, and start now," he said. "You can go only so far with the comparative advantages of trust, comfort, and convenience."
