PHOENIX - A banking trade group today announced the results of a mystery shopping program that it said showed a "high degree of compliance and professionalism" among banks that sell investment products.
The Bank Securities Association trumpeted the findings here, at its annual convention, as proof that banks have made "tremendous" improvements in mutual fund sales techniques and disclosures.
"The results are nothing short of dramatic," said the group's general counsel, Robert M. Kurucza. "I can't imagine a more favorable response."
The study, conducted by Price Waterhouse LLP Securities Industry Consulting Group last November and December, tested 1,600 registered representatives at 17 regional banks. The banks - all members of the trade group - paid an undisclosed fee to participate.
Although upper-echelon executives of the banks knew about the testing expeditions, they were not supposed to inform the investment sales staff, association members said.
There was "no cooking of the books, " Mr. Kurucza said, who maintained the study was done in an "honest and an objective" manner.
Mystery shoppers, who were hired by Meyers Research Center, a New York marketing research group, paid 288 visits to registered bank broker-dealers who were selling mutual funds, annuities, and other securities.
The shoppers looked for compliance with the banking regulators' interagency statement, which requires salespeople to disclose to customers in an oral presentation that investments are not products of the bank, are not insured by the Federal Deposit Insurance Corp., and are subject to market risk and loss of principal.
Shoppers also checked to see whether investment sales locations were separate from the branch banking activities, as the interagency statement requires.
Investment sales representatives were also scrutinized for the way they handled customer complaints, their knowledge of investment products, and whether they made the customer "feel comfortable and established rapport." No sales were made during the visits, however.
The survey found that about 70% of the reps made all three required interagency statement disclosures, and 88% emphasized the market risk portion of an investment.
In terms of sales effectiveness, representatives scored a rating of 4 overall, on a scale of 1 to 5. Bank brokers rated highest - a 4.3 on average - for establishing rapport with the undercover customers.
Many banks are already conducting similar programs on their own.
First Fidelity Bank, in Newark, N.J., said it has a continuing mystery shopper program, according to Richard Baxt, who heads the bank's investment sales program.
Mystery shopper programs "are very useful for management to know what's going on in the branches," Mr. Baxt said. He added that along with disclosures, his bank has also surveyed customer satisfaction after a transaction has occurred.
