Fidelity Guru Peter Lynch Says Banks Should Help Educate Public on

CORONADO, Calif. - Fidelity Investments' resident guru says he is appalled at how little people know about investing.

On this island resort off San Diego to address more than 300 at a financial planning conference, Peter Lynch said that an "amazing number of people know nothing about the market."

"There is no place in America where they teach people about the stock market," said Mr. Lynch, the former portfolio manager of Fidelity's Magellan Fund, the world's largest equity fund.

Mr. Lynch said, however, that banks can play a role in improving the public's knowledge about investing. And he supported banks entry into the mutual fund business.

"Banks should be in it," he said. "It's good for the public," as long as banks market investment products properly, he said.

Bankers at last month's conference praised Mr. Lynch's support of banks' decision to enter the investment products business.

One attendee went even further to say that to stay afloat, banks should approach the investment products business aggressively.

"Banks can no longer sit back and wait for money to come through the lobby," said Mary L. Mohr, a senior vice president at Denver-based First Trust Corp., a company that administers retirement plans for banks.

Ms. Mohr said the forward-thinking banks have already moved away from providing just traditional savings products, such as certificates of deposit, and are adding a variety of new investment options.

But Mr. Lynch stressed that banks need to take care to explain that mutual funds are not protected by the Federal Deposit Insurance Corp.

Industry observers attending the conference agreed that banks have a duty to educate their clients about both the benefits and pitfalls of investing.

"Banks have to educate customers about investment products," said Linda J. Brenner, who heads sales force marketing for the Investment Company Institute, a Washington-based trade group.

"It's great if customers move from CDs to stocks, as long as they know what they're doing," Ms. Brenner said.

She also emphasized that mutual funds are long-term investments and banks should "explain things fully" to make sure their customers are willing to hang in for the long haul.

Mr. Lynch predicted that banks and other financial institutions that market mutual funds would be successful in the long term.

"The people in the business of providing saving mechanisms are going to do brilliantly, particularly if they are going to provide (products) with above-average performance," he said.

For reprint and licensing requests for this article, click here.
MORE FROM AMERICAN BANKER