New regulatory guidelines on mutual fund sales by banks may give a boost to so-called platform programs.
Guidelines issued this summer by the Office of the Comptroller of the Currency spelled out conditions under which certain bank employees could double as investment products salespeople.
The guidelines bar banks from using tellers to sell such products. In addition, sales by employees who take in deposits, such as new-accounts personnel, are discouraged.
Nevertheless, the guidelines clear the way for bank officers and new-accounts personnel to sell funds if customers are informed of the dual role.
Banks see the guidelines as a flashing yellow light, letting them proceed with caution, according to Glen Casey, a consultant with Cerulli Associates, Boston.
In the past, when the Comptroller's office has said it is not prohibiting programs, "that was tantamount to blessing them." Mr. Casey said. "We expect to see platform programs grow."
Fed Guidelines Tougher
The Federal Reserve Board, which also issued guidelines this summer, took a harder line, blocking employees who open deposit accounts from selling mutual fun and annuities. But national banks and state banks that don't belong to the Federal Reserve System aren't covered by the Fed rules.
In the wake of the guidelines, banks are taking a fresh look at training platform bankers to sell investment products.
First Chicago Corp., for one, is making plans to use platform bankers part-time to supplement the existing sales force in its First National Bank of Chicago subsidiary.
The bank now has 43 retail broker-dealers with Series 7 licenses from the National Association of Securities Dealers, according to a survey by Cerulli Associates.
Some First Chicago bankers are getting Series 6 licenses or insurance licenses to sell investment products, said Richard A. Davies, vice president and head of investment services Chicago.
Help for Smaller Branches
He emphasized that the platform sales program is experimental. The bank will keep a close eye on regulatory developments as it decides how to proceed. "We are in a holding pattern to see if this is a guideline or a rule," he said.
Having a limited platform program is especially beneficial for branches that do only a modest business in investment products, Mr. Davies said. "Some branches really don't warrant a full-time representative."
First Chicago's platform program plans reflect its commitment to increase its mutual fund sales. "We are being much more proactive in soliciting business, instead of living off of walk-in customers," Mr. Davies said.
To capture more customers, salespeople should be as close as possible -- within regulatory guidelines -- to the bank's traditional services "both physically and attitudinally," he said.
The Comptroller's office suggests that bank management physically "separate the retail deposit-taking and retail nondeposit sales functions."
Mr. Davies is quick to point out that First Chicago, which manages $1.8 billion in mutual fund assets, is not the "lone maverick" moving ahead in platform sales.
So far there are "very few" programs in place, according to Cerulli consultant Mr. Casey. But as a result of the Comptroller's guidelines, he predicts platform programs will grow.
Growth is definitely in the cards at Banc One Corp. It now has about 500 bankers licensed to sell investment products, said John Russell, a spokesman for the Columbus, Ohio-based bank.
Banc One is in the process of redesigning its 1,400 branches to include personal investment centers. Within the next couple of years, Mr. Russell said that the bank plans to have "several thousand" bankers licensed to sell investment products.
"Our philosophy has been to use Banc One people and get them trained and licensed," Mr. Russell said.
The reason for using Banc One personnel is "to keep the customer whole," instead of sending them to outside salespeople, he explained.
Pilot Program
The bank industry is being extremely cautious in complying with guidelines, especially since investment sales will be a major business for banks in the future, he said.
Society Corp. has instituted a pilot program with 15 platform people who will obtain Series 6 licenses to sell mutual funds in branches.
The Cleveland-based company, which manages $2.6 billion in assets, has plans to train 200 platform bankers to supplement its mutual funds sales force, according to company officials.
Unlike most banks, San Francisco-based Bank of America is planning to have representatives who sell investment products Series 7 licensed. Series 6 licenses are sufficient for mutual fund sales. while Series 7 covers a wider range of products.
Bank of America's approach is "relatively unique" in the industry, Mr. Casey said. The bank manages $18.3 billion in mutual fund assets.
Union Bank of Los Angeles has 130 representatives selling investment products. "Their growth is clearly within the platform area," Mr. Casey said. Only 10 are dedicated investment salespeople with Series 7 licenses.
Union, a unit of Bank of Tokyo, started a platform program in July 1992 to train bankers to sell investment products. "Everyone just finished training two weeks ago," said Gregory Knopf, vice president and manager of the Union Investors Funds.
Conservative Approach
Union Bank initially decided to train platform people, instead of using outsiders, because it "wanted to be conservative in our approach" and enable bankers to learn new skills, Mr. Knopf said.
Union's total fund family is $1.4 billion, about $200 million of which comes from the retail side, according to company officials.
Signet Banking Corp. in Richmond, Va. has expanded its platform program significantly, Mr. Casey said. In the past year, 115 Series 6-licensed bankers have been added to its mutual fund sales force, supplementing the bank's 35 Series 7 sales representatives. Signet manages about $7.6 million in assets, according to Lipper Analytical Services.
And Cullen/Frost Bankers' Frost National Bank, San Antonio, which had 30 sales representatives last year, now boasts an 84-member sales force, 74 of whom are platform people, according to the Cerulli study.
Not every bank is racing to jump on to the platform program bandwagon. Although it has $3.6 billion in mutual fund assets and an extensive platform program in other areas, Mellon Bank Corp. has "no plans yet" for platform people to sell investment products, said Thomas Butch, a spokesman for the Pittsburgh-based bank.
"Most banks have gone with dedicated representatives" instead of the platform program route, Union Bank's Mr. Knopf said.
