In the mutual fund business, Busey Bank stresses knowledge over numbers.
The bank, based in Urbana, Ill., has successfully created an aura of expertise that belies this community bank's $700 million-asset size. In doing so, the bank has made mutual fund sales a successful contributor to the bottom line.
"In addition to selling mutual funds, we also like to be known as the expert in mutual funds," says Curt Anderson, president of First Busey Securities, a wholly owned subsidiary of Busey Bank responsible for $145 million in assets. Busey has crafted its image by keeping a visible presence in its community.
Mr. Anderson, for example, does a morning market report on a local talk radio station. First Busey also sponsors regular seminars on investing and financial planning and encourages its six brokers to take advantage of public speaking opportunities.
This strategy has helped build Busey's mutual fund asset base to nearly $70 million. It has also helped move First Busey steadily away from relying on the bank for referrals or maturing CD lists.
The brokerage, which offers mutual funds from about 50 companies, now boasts that more than a quarter of its investors come from outside the bank, a respectable figure for any size bank.
"This is a tremedous amount of new money for a community bank to pull in," says Dave Nadig, senior consultant at Boston-based Cerulli Associates.
"What has brought us the most business and the most goodwill are educational seminars," Mr. Anderson says.
Yet First Busey keeps these seminars, two of which featured Morningstar editor Don Phillips, away from the product-specific hard sell and focuses instead on general information and advice.
This approach holds even for First Busey's print advertising, which promotes the experience and know-how of its staff. The ad has another advantage too. "People think banks do this business part-time with just one or two people, but we show that we have 11 people on staff."
The emphasis on expertise is especially appropriate considering that Urbana is also the home of the University of Illinois and a large number of learned, skeptical citizens.
Establishing its own brokerage subsidiary is another important part of Busey's success in mutual funds, though one it came to gradually after first offering financial planning services nine years ago.
While the bank had success with this service, its inadequacy became apparent when a husband and wife, both medical doctors, came to the bank looking for a financial plan to help them manage their combined $500,000 a year income.
When Busey's financial planner recommended mutual funds, the couple were ready to buy right then and there--except the bank did not offer mutual funds.
The couple left fuming over what they considered a waste of their time. The bank quickly corrected "putting the cart before the horse," as Mr. Anderson puts it, and expanded to a full-service investment line in 1986.
When the service evolved again five years later as an independent broker/dealer, Busey saw business double. Mr. Anderson says he thinks part of the reason is a shift in the way customers view banks as a source of mutual funds.
"When we said we are now our own broker/dealer, we showed we are serious about this," Mr. Anderson says.
Establishing a separate company to handle investment sales is step many banks, even large ones, often ignore, according to Mr. Nadig of Cerulli Associates.
"Community banks need to be focused on delivering a service to their customers rather than just a revenue-generating machine," he says, "and setting up a small but high-quality small brokerage operation is exactly the right thing to do."
Since the brokerage attracts such a large percentage of outside customers, Busey is also well-positioned to pitch other bank products, especially checking accounts.
"When customers buy and sell securities through us, it's more convenient for them to have an account here that can be debited and credited upon their approval," Mr. Anderson says.
Sometimes the bank adds an incentive. First Busey investors over age 50, for example, are encouraged to join the bank's Fortune 50 club, a special service for senior citizens that entitles members to 20% discounts on trades made with the brokerage subsidiary.
"What's critical is that we don't look at ourselves as purveyors of product or as mutual fund salespeople," Mr. Anderson says. "We look at ourselves as financial advisers."
Good customers relations are also what helped First Busey weather this year's market downturn, which Anderson says put business off about 3% to 4%.
Part of this was due to wise diversification, but also to reaching out to customers to explain declines in net asset value and re-emphasize the value of dollar cost averaging.
First Busey recognizes, however, that no amount of financial counseling adequately prepares customers for bond fund losses, which many consider loss-proof. Only 30% to 40% of First Busey's mutual fund sales are invested in bonds, and those are heavily diversified by maturity and type of bond.
Competition for mutual fund customers in Urbana consists largely of branches of large brokerages such as A.G. Edwards and Merrill Lynch and some local financial planning firms.
"Our competition is not coming from other banks," Mr. Anderson says. "Although we have Banc One and First of America, we've seen little activity at their local branches."
First Busey also has an edge due to its relationship with Stephens, Inc., a Little Rock, Ark., investment banking firm that Mr. Nadig calls "one of the best clearing agents serving the banking market."
