Banks that sell uninsured investments have vastly improved their handling of consumer disclosures, according to a study released last week.
Nine out of 10 bank-based sales representatives routinely inform prospective investors that mutual funds and other investments sold at banks lack deposit insurance, according to the study conducted for Barry Leeds Associates, New York. (See related article on facing page.
Last year, a study done for the firm concluded that only six out of 10 banks were making the disclosures.
"We've seen remarkable improvement," said Barry Leeds, president of the firm, which conducts customer service and compliance audits for banks.
Guidelines directing banks to tell prospective mutual fund buyers about investment risks were issued by banking regulators last summer.
To check on banks' progress, Leeds & Associates hired local testers to conduct the study of the 20 leading players in five major markets: New York, Atlanta, Boston, Chicago, and Los Angeles.
Field agents were sent out as novice investors seeking higher returns than those offered by certificates of deposit. Each person held about $20,000 to invest for three to five years.
Individuals were not coached on what sales representatives should disclose, Mr. Leeds explained, but were instructed to record precisely what the broker said and did.
Among the key findings:
* Three-quarters of the bank brokers advised customers that buying a mutual fund means placing principal at risk.
The same proportion informed investors that rates of return were not guaranteed.
* More than half warned that the value of shares and principal could fluctuate as markets rise and fall.
