WASHINGTON - Bankers who turned out for the mutual fund industry's annual confab here were critical of some of the steps their institutions have taken to enter the $2.3 trillion fund business.
Some even predicted that a shakeout in the fund industry will see many banks give up managing mutual funds in coming years.
"There are way too many bank funds, and lots are not economically viable," said J. Richard Carnall, chairman of Pittsburgh-based PNC Bank Corp.'s institutional management division.
Speaking in panel discussions and in the hallways between events, bankers at the Investment Company Institute's annual conference often took a tough view of their efforts to date.
During one panel discussion, Robert D. Flowers Jr., chief executive of BankAmerica Corp.'s investment services subsidiary, criticized banks for pushing products instead of helping investors.
"We're selling what can be sold instead of what should be sold," Mr. Flowers said.
Added Mr. Carnall: "Banks are trying to do a good job educating customers but still don't understand funds the way they understand loans."
Mr. Flowers said that banks' salespeople need to be stressing the mantra of diversification to customers. Instead, he argued, many are selling the hot investment of the day instead of offering advice based on a customer's long-term needs.
"We ought to start talking about how to create a sales culture that will teach diversification to its clients," he said.
Mr. Flowers made his remarks as the only banker on a panel discussing trends and challenges for broker-dealers. He implored a packed room of mutual fund and bank executives to begin instilling a more customer- oriented culture.
Bank brokers, he said, are beginning to feel the heat from customers whose investment portfolios took whacks in the bond market slump of 1994.
"Now the banks are confronted with the reality of people coming back and saying, 'You didn't tell me I could lose my principal,' " Mr. Flowers said.
He criticized the recent trend among many banks to hawk annuities. In particular, he said, banks are selling too many fixed annuities and should be selling more variable annuities.
On an optimistic note, Mr. Flowers complimented mutual fund companies, which he said are training bank brokers to help customers pick the appropriate investments instead of pushing products.
"I think the mutual fund industry has changed in the way it tries to help their partners in the bank world," Mr. Flowers said.
Another hopeful banker was W. Christopher Maxwell, Keycorp's executive vice president for the trust and investment management group. He said assets at Keycorp's Victory Funds continue to increase.
He and many of his banker peers feel at one with the mutual fund companies, Mr. Maxwell said, as they now share many problems.
Like many of his counterparts, Mr. Maxwell bemoaned current disclosure regulations.
"We desperately want to have a highly understandable prospectus. There's too much language we are required to put in them," he said.
