As the man entrusted with marketing Pioneer mutual funds through banks, Barry K. Knight has met with some success.
Banks contribute more than 7% of the Boston-based fund company's sales, quite a boost from the less than 1% they brought in a year ago when Mr. Knight took over as Pioneer's vice president for financial institutions sales.
But industry experts wonder whether Mr. Knight's efforts are too little too late. They argue that Pioneer Group Inc., which manages about $10.5 billion in fund assets, is just one of a plethora of small fund companies that waited too long to approach banks.
The small fund company, founded in 1928, is virtually locked out by behemoth competitors such as Putnam Investments and Franklin Resources Inc., which established bank strongholds years ago.
Mr. Knight, a gregarious Jacksonville, Fla., native with a thick southern drawl, isn't raising the white flag just yet.
He is trying to defy the odds by focusing on a niche-oriented strategy for getting his foot in the door of many banking companies.
For example, he is pushing age-weighted profit sharing plans, a benefits package designed to benefit older participants in a retirement plan. Since employers at small companies tend to be older than their staffs, these types of plans are becoming popular with them.
"The vast majority of banks we have targeted cater to the small business," he says. "Most of those businesses get all their financial needs met at the bank."
Mr. Knight says 88% of all businesses have fewer than 20 employees, and it is the last frontier where no fund company dominates.
"That to me spells opportunity," he says.
The age-weighted profit sharing plan was born out of an Internal Revenue Service ruling in 1990 that benefits employers reaching retirement age. Unlike traditional profit sharing plans, the amount of contributions into these plans are based on age as well as salary, allowing older employees and employers to contribute more tax-deferred dollars than younger ones.
Pioneer provides the small employers participating in these profit sharing plans with its array of mutual funds along with services such as record keeping and the preparation of participant account statements.
Mr. Knight, who has been a broker at three different banking companies, said age-weighted plans will help banks keep a lock on customers that currently borrow from them.
Pioneer began marketing age-weighted plans this spring, and has already picked up Mr. Knight's former employer Barnett Banks Inc., along with La Salle National Corp., First Alabama Bancshares, and Sunburst Bank.
But some observers doubted the age-weighted plan would add much value to bank programs that other fund companies don't already offer.
"The question is, will Pioneer be able to garner shelf space against existing players, MFS, Putnam, Colonial, Fidelity, all of which have bundled retirement plans already," says David Master, a senior consultant at Optima Group, Fairfield, Conn.
Also, many banks that manage their own mutual funds are talking to consultants about setting up their own retirement plans, Mr. Master says. "Welcome to the world of 4,000 other players who are trying to do the same thing," he says.
Mr. Knight hopes to leverage his experience as a former broker in a bank. When he began 11 years ago at First Empire State Corp. in Buffalo, a fund company that offered training and market support was rare enough, let alone a specialized retirement plan.
"Needs have become more sophisticated. In 1984 we were just hopeful somebody would call the banks," he said.
One way Mr. Knight has drawn on his bank experience, and found success, he says, is by convincing Pioneer executives to promote funds through banks with "B" share pricing, which has a lower sales charge up front, but a penalty attached to early redemptions.
Additionally, Mr. Knight has hired a sales force of five, dedicated to pushing Pioneer's funds to banks, and five in-house employees offering marketing and sales support to bank-based brokers. Mr. Knight said he hopes to increase his sales force in the field to 10 or 12 in two or three years.
Skeptics may call Pioneer a Johnny-come-lately, but Mr. Knight says he couldn't think of a better time to make his move.
Since bank customers got burned by last year's bond slump, they want to be eased into stock funds with conservative growth and income orientations, a specialty of the 67-year old fund company.
"The dissatisfaction investors had with fixed-income funds went a long way to change how investment products were sold through banks," he said.
Why did it take so long for bank brokers to promote long-term investing instead of finding alternatives to certificates of deposit?
"Until you experience negative market conditions, you don't gauge your performance."
But with mutual fund performances falling off last year, "banks have gotten that opportunity in spades," Mr. Knight said.
