Firstar Says Efforts to Instill Market Savvy in Customers Helps to Keep

Firstar Corp. is claiming dividends from a pair of efforts to educate investors in its mutual funds.

The Milwaukee-based regional banking company is including in its shareholder statements unusually detailed analyses of its mutual fund portfolios.

Firstar is also sending investors newsletters meant to make them savvier money managers.

The payoff has been that retail investors have tended to keep money in the Portico funds even when returns have lagged as markets have suffered.

"The better-informed and better-educated clients make better decisions," said Mary Ellen Stanek, president of Firstar Investment Research and Management Co.

Among other responsibilities, this money management arm of Firstar manages the company's Portico mutual fund family, which has $2.5 billion in 15 portfolios.

Currently, 80% of the money in the Portico Funds is from institutional investors. But Firstar aims to get more retail investors.

To help ensure that these investors understand what they buy, Firstar is including lengthy discussions of the investment strategies, types of investments, principal volatility, and yield of its mutual funds in shareholder statements.

These analyses are supposed to be much lengthier and more informative than the perfunctory one- or two-page performance analyses in most shareholder statements.

Also, since last summer Firstar has been sending a quarterly newsletter to investors - written by an outside ghostwriter - which deals with trends in the marketplace and answers specific questions.

Subjects covered include dollar cost averaging, compounding, and the process by which investment decisions are made. Letters also are answered.

One investor, who had asked about derivatives, wrote back praising Firstar's response as more timely and complete than he'd received from the three other fund companies he'd asked, Ms. Stanek said.

Ms. Stanek said she considers readability of the statements and newsletter to be crucial. She often asks her dentist husband and other family members to read the materials and give her feedback.

"My litmus test is whether my mom, as an intelligent person, can understand it," Ms. Stanek said.

Educational efforts like Firstar's are rare for banking companies, said Glen Casey, a consultant with Cerulli Associates Inc., Boston. "It puts them in the forefront," he said.

But Eric Gershman, president of Published Image Inc., Boston, predicted that more banks will follow suit.

"The main trend that we've seen amongst shareholders in bank funds is a lack of knowledge in the funds they are in," Mr. Gershman said.

Consequently, banks are trying to make investors better educated so that they are more likely to keep money in bank-run funds, even during down markets.

Mr. Gershman is in a good position to judge banks' intentions. His company provides shareholder communications services to 28 banks.

Michael O'D. Moore is a writer based in Vassalboro, Maine.

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