Cleveland-based Society Corp. has set an ambitious goal for its proprietary mutual funds: $10 billion in assets by 1997.
Just how does the bank plan to get there? Chief financial officer James K. Wert has a simple answer: "There she is."
She is Mary K. Stern. Called Mary K. around the bank, Ms. Stern is drawing up a blueprint for an aggressive push in investment products.
In addition to training hundreds of brokers, Ms. Stern is developing new financial planning and asset allocation tools to help baby boomers and other customers plan for the future.
Melding Acquired Funds
At the same time, the Society Funds are being revamped. Mutual fund portfolios acquired through the bank's mergers will be combined with similar funds, and some new products will be added to the lineup.
Executives at Society express joy at snagging Ms. Stern from Norwest, where she had managed all aspects of the bank's mutual fund and trust assets for five years.
Ms. Stern, 44, had also worked for investment firms Dain Bosworth Inc. and Merrill Lynch, among others.
Industry officials give Ms. Stern much of the credit for the growth of Norwest's program. But the New Hampshire native declines to discuss her former job, saying only that she decided to jump ship to Society because the program, which is strongly supported at the highest levels of the bank, has great growth potential.
Strong Base to Build On
While Norwest ranked 12th in size on a midyear ranking of bank proprietary funds compiled for the American Banker by Lipper Analytical Services, Society came in 26h.
But with Society Funds' $2.6 billion in assets. Ms. Stern inherits a strong base to begin her efforts.
Sitting in a corporate dining room, high above Lake Erie, she speaks with authority about her designs, even though she's just three months into the assignment.
The first test of her strategy kicked off last week. Fifteen part-time brokers began selling funds in 11 of Society's 28 Columbus, Ohio, branches. Ms. Stern hopes to use the pilot to refine the strategy for a full-scale rollout by year's end.
High Hopes
Expectations are clearly running high, now that Ms. Stern is starting to put her imprint on Society's mutual fund program. She is even starting to get good-natured gibes from colleagues.
"The honeymoon period is over," boomed Mr. Wert during an interview in his corner office.
Ms. Stern, whose pageboy-style black hair is tinged with gray, smiled at his joke. Still, the weight of Society's ambitions rests largely on her shoulders.
A central component of the strategy is to dispel the notion that banks can't manage money. In particular, the bank wants to sell Society's investment acumen to its customers.
To drive the argument home, the bank has embarked on a television, print, and radio advertising blitz. Executives wouldn't disclose the price tag, but they acknowledged that it runs to seven figures.
"Banks are not a great place for money. Kind of reminds us of another famous myth," reads the copy on a full-page ad in a July 5 Business Week supplement on Cleveland. Below the ad is a Spanish galleon, sailing off the edge of a flat earth.
The advertisement also cites information from a CDA Investment Technology study that found banks have solid money management track records.
And it touts Society's investment arm's expertise with the $26 billion it has under management. The ad copy concludes: "To discover this kind of performance, talk to Society. Unless, of course, you still believe the earth is flat."
Until now, a customer wanting to discuss mutual funds in one of Society's 440 branches had to make an appointment with one of 30 salespeople, all of whom carry series 7 licenses from the National Association of Securities Dealers.
That was too much territory for too few people, Society executives agree. Ultimately, Ms. Stern would like to see more full-time brokers.
For now, however, she is focusing on training 200 platform people to add mutual fund sales to their other duties.
"We want to be able to focus our efforts on the platform level close to the customer," she said.
Experts Called In
The bank has been assisted by two outside firms in the initial training of the first platform sellers, including the 15 who are being deployed for the pilot program.
All platform sellers will hold NASD series 6 licenses.
While some bankers argue that it is more prudent to use the more broadly schooled series 7 representatives exclusively, Ms. Stern thinks a mixture of the two will work well.
"The series 6 is not necessarily a lesser 7," Ms. Stern said. The difference is that the series 6 salesperson may only sell mutual funds and is tested on a more narrow subject area, she explained.
Though most members of the existing sales force have brokerage backgrounds, the new trainees are longtime bankers. Cary H. Koontz, president and chairman of Society Investments Inc., said mixing the two cultures reflects the way banks and brokerages are moving together.
Though series 6 brokers will outnumber series 7 brokers, they may not outsell hem, said Phil Shively, a series 7 representative in Columbus. That's because the series 6 brokers will be juggling fund sales with other responsibilities.
"From my perspective, it's a full-time job," he said. To keep in contact with clients and conduct business in addition to other duties may prove too heavy, he said.
The pilot program will answer that question, he said.
Mr. Shively said the series 7 representatives haven't formally been very involved with the series 6 program. But before the launch, he has been fielding a lot of questions about the appropriateness of various investments.
It's an easy relationship because he knows all the new series 6 salespeople from the branches, he said.
Society has 10 Society funds, plus four funds from the takeovers of Ameritrust and Trustcorp.
Those will be consolidated to 12 funds under the Society Funds umbrella. Four to eight new funds will be added.
The Winsbury Group has distributed the Society Funds, formerly called the Emblem Funds, since the first ones were launched in 1987 with $800 million in institutional money. To date, institutional sales have produced the lion's share of the assets, but retail sales are gaining steam.
The bond and equity funds carry front-end sales charges only. Until recently, the charge was 4% for all funds, but fees on bond funds were recently dropped to 2%. Because of the sensitivity of the bond markets, the loads on the bond funds were seen as too steep, Ms. Stern said.
She said the bank will most likely add level-load pricing as an option on the funds. Contingent deferred sales charges, better known as back-end loads, aren't planned because they are generally half as profitable as front-end loads. Also, it can take as long as eight years to recoup up-front payments to brokers, Ms. Stern maintains.
Baby Boomers Targeted
The broader product mix and load options will allow the bank to better serve the markets it is targeting, she said.
Society is looking to baby boomers to fuel growth in its funds, and is making a special effort to capture their business.
Consequently, she wants the bank to look at younger clients who are just beginning to develop cash flow above current needs. Society's ideal mutual fund candidates, Ms. Stern said, are people in their early 30s with income of about $35,000.
To that end, the bank will emphasize financial planning as part of its mutual fund services.
