Amcore Financial's No-Load Bet Seems To Be Paying Off

Amcore Financial Inc. committed a very unbanklike act 15 months ago when it began selling its proprietary mutual funds without a sales charge.

But the bet now looks like a winner.

Executives at the $2.4 billion-asset Amcore, which is based in Rockford, Ill., said the switch to no-load pricing has been the springboard for a big jump in retail investment sales.

"Considering where we were and where we are now, we've come a long way," said Patricia M. Bonavia, marketing director for personal investor services and head of retail mutual fund marketing.

Retail sales of Amcore's Vintage Funds hit $29 million in 1995 - nearly double the bank's $15 million goal. By contrast, retail sales in 1994 amounted to $4.5 million.

Only a handful of banks offer their funds to consumers without loads, with NationsBank Corp., Charlotte, N.C., and Trustmark Financial Corp., Jackson Miss., joining the clique earlier this month.

Most banks continue to rely on the mutual fund sales fees, known as loads, to compensate brokers for their efforts.

During the past few years, more banks have added sales fees than have dropped them. Among them: Fleet Financial Group and Firstar Corp. Finding a way to adequately compensate brokers for making no-load sales has limited the appeal of the no-load approach.

But at the same time Amcore dropped its sales charge, it also shifted sales from the brokerage to the platform.

By relying on branch workers, the bank minimized its compensation headaches and expanded its sales force tenfold.

Now 79 bank employees - instead of five brokers - sell mutual funds when they aren't opening checking accounts or handling customer questions in 34 bank branches throughout northwestern Illinois.

Amcore still restricts annuities sales to brokers, unlike some other banks that had moved everything but retail sales of individual stocks and bonds to the platform. And brokers continue to work with investors interested in individual securities.

But there's no denying that the shift to no-load mutual funds has hit the bank's brokerage hard. Referrals to bank brokers have dropped by half, according to Alan W. Kennebeck, group vice president for diversified financial services.

The bank is exploring ways to use the brokers to reach nonbank customers. Though regulatory impediments stand in the way, the bank also soon hopes to be able to use brokers to review the platform workers' recommendations.

Whether platform workers can stay motivated to sell for the long-haul without direct financial compensation remains to be seen. For now, the bank relies on rewarding platform workers for no-load sales goals with symbolic gifts, such as plaques or clock, or recognition in the company newsletter.

"They don't get paid" for the sales, Ms. Bonavia conceded. "But they went through a lot of training and ... they really see the value in being more customer-conscious."

But veteran fund watchers are skeptical that no-load funds can be sold that way for long.

"It's a great leap of faith that people will sell them on a consistent basis," said Geoffrey H. Bobroff, a mutual fund consultant in East Greenwich, R.I. "There's a plateau that a no-load program can reach and then go no further. Once the novelty wears off what motivates them to do the job they have to do?"

Despite the conventional wisdom, a few other banks are embracing Amcore's enthusiasm for no-load waters. "We realize we're giving up something," by dropping the income from sales fees, said Michael L. Allen, senior vice president at Trustmark National Bank, Jackson, Miss. "But it's worth what we might call an experiment."

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