Slow Start Is an Understatement for IBAA Program

HONOLULU - The Independent Bankers Association of America's program to help its members sell investment products is looking suspiciously like a flop.

Only 12 of the association's 5,663 members have signed up for the sales program since it was launched a year ago, officials of the trade group said.

Both the IBAA and its mutual fund partner, Massachusetts Financial Services, Boston, remain optimistic, however, that 1995 will be a breakthrough year.

But judging from the sparse attendance at mutual fund workshops during the trade group's national convention here, interest in the program is low. While the exotic locale and good weather could be partly to blame, several bankers said they simply weren't ready to take the plunge.

"We don't want to get involved in selling mutual funds," said J.W. Schnaidt, president of $25 million-asset Menno State Bank in Menno, S.D. "It's just not worth the trouble for the tiny amount we would get from it."

Even some who expressed interest in the program were critical of it.

Thomas Manz, chairman of California's Roseville First National Bank, said he was hesitant to sign up unless he were assured his customers would be satisfied with one company's mutual fund offerings.

"We live in a sophisticated world," Mr. Manz said. "We have these baby boomers that read Forbes and Money and aren't going to be content with just a handful of funds."

But Lisa Jones, an MFS vice president who oversees the program, defended the IBAA's decision to pair with just one company.

"Look, I think one government fund is the same as another," she told a small group of bankers at one of three mutual fund workshops offered during the convention. "We're living in an era where the short list is alive and well, and what we're offering here is complete diversification through one company's funds."

IBAA officials said they know it won't be easy to make the program succeed.

Gary C. Teagno, president of IBAA Community Banking Network, which operates the brokerage effort, said more than 500 banks had inquired about selling investment products. But he added that "even in the best of circumstances it can be a slow process."

And Monique E. Hanis, the IBAA's marketing director, noted that even the association's successful debit card service, launched two years ago, had languished until recently.

The few banks that are using the IBAA program sound enthusiastic. First National Bank of Herminie in Irwin, Pa., joined last May. James R. Lauffer, the $200 million-asset bank's president, and past president of the IBAA, said, "It's taken a long time to build, but we're satisfied with it so far."

Jeff A. Nunn, president of the $40 million-asset Citizens Bank, said brokerage firms were "burning up the telephone lines calling my customers." The Tucumcari, N.M.-based bank started selling mutual funds through the trade group three weeks ago.

But many bankers seemed to see more obstacles than opportunities.

One big complaint was that IBAA members, with average assets of $45 million to $50 million, are too small to support even a part-time investment representative.

Another concern was regulatory scrutiny.

"We've got enough people poking into our business without having the FDIC or some other regulator come beat us over the head because we're not selling them right," said one banker, who did not want his name used.

Most at the convention were also worried that the timing may not be right. Shaky stock and bond markets have caused some investors to lose principal on their holdings, and bankers fear a backlash if the same were to happen to their customers.

"You have to remember that we've spent our lives telling our customers that, if they put a dollar in, they're going to get at least a dollar back," said R.W. Hawkins, chairman of Southern Commercial Bank, St. Louis.

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