Stock mutual funds continue to sell like hotcakes, but they are off to a tepid start this year at many bank brokerages.
Top executives of these units acknowledged in a round of interviews that January sales had been flat compared to December's. They said that brokers' jitters about a stock market correction, along with severe weather, took a toll on the brokerage units.
"The reps were reluctant to aggressively sell" stock funds, said Drew Kagan, president of Cincinnati-based Provident Bancorp's brokerage unit. "They were afraid of the dips in the stock market."
Flat January sales at many banks came in the midst of record sales growth for the industry overall, suggesting that banks are lagging behind their competitors.
The Investment Company Institute, a Washington trade group representing the mutual fund industry, reported net new sales in December were $16.01 billion, up 14.7% from November.
The trade group said investors have been flooding mutual funds with record amounts of new money. Last year, they put $118 billion into stock and bond portfolios, 31% more than in the previous record year, 1993.
Mr. Kagan said recent rebounds in the stock market had calmed his 14 brokers, making him hopeful sales would jump next month. "I got the sense in our Monday morning meeting that they feel better," he said.
Other bank brokerage chiefs, particularly in the Northeast, blamed slow sales on the blizzard that blanketed the region in early January.
Sales of funds at National Westminster Bancorp, Jersey City, fell 20% short of the company's goal for January.
"The snowstorm, flooding, ice - pretty much every act of God you can figure affected our business," groused Susan Rau, executive vice president overseeing private clients, investments, and insurance group.
The same snowstorm dumped 14 inches on Cincinnati, keeping customers out of Star Banc Corp. branches and knocking the month's sales down 50%, said B. Randolph Bateman, president of its brokerage subsidiary.
"Unlike brokerage firms, we rely on face-to-face interviews with customers, and we had the worst snowfall we've ever had," he said.
But Mr. Bateman admitted another reason for the sales falloff: The nine best of his 32 brokers spent a week this month in Hawaii after winning a trip for 1995 sales production.
At least one industry observer didn't buy the bank brokerage chiefs' explanations for flat sales, arguing that problems run deeper than bad weather or a jittery market and will continue through the year.
Rolland Johannsen, president of Washington consulting firm Furash & Co., said bank fund sales have "plateaued" because the institutions have trouble reaching beyond a customer base that rolls over money from certificates of deposit into mutual funds.
"I think there's been a reassessment in the industry overall of the profitability of their current brokerage operations," he said.
He added that he has six clients who recorded flat sales month to month all of last year. He declined to name them or elaborate.
Mutual fund company sales executives were surprised to hear that some banks acknowledge a lackluster January.
"That's amazing to me; our sales through banks are soaring," said Maryann Bruce, senior vice president-financial institution division at Oppenheimer Management Corp.
Sales through banks are up 30% to 40% from December, she said.
Fidelity Investments saw a 20% to 25% increase in sales through banks during the same period, said Andrew Olear, vice president in charge of selling through bank brokerages.
Its most popular product for bank brokers is Fidelity Advisor Growth Opportunities Fund. Bank customers are also "tiptoeing" into the company's high-yield, emerging-markets bond fund, Mr. Olear said.
"I think bank reps are educating the customer a lot better after getting raked over the coals regarding disclosure and suitability," he said.
