Signet Banking Corp., one of banking's more innovative marketers, is pursuing mutual fund assets with an unusual lure: a money market deposit account with a lofty yield.
Executives of the Richmond, Va.-based banking company refused to discuss the product. But a representative at a Signet customer call center said information about the accounts had been mailed nationwide recently as part of a larger effort to market the company's Blanchard no-load mutual funds.
In using a money market deposit account to draw customers, Signet appears to be exploiting one of banks' great advantages over their nonbank fund rivals: the security of deposit insurance for bank money market accounts.
By offering a money market account with a yield twice the average of competing money market accounts and a percentage point higher than the average money market fund, Signet offers investors a powerful incentive.
"A lot of banks are looking at going national as far as targeting attractive customers" for their investment products, said Les Dinkin of NBW Consulting, Westport, Conn. "It's a lot easier to start a conversation with those customers with an FDIC-insured money market account than a debt or equity fund that people may not have heard of."
The fine print of the money market account solicitation tells participants "they will receive more information on mutual funds available through Signet Financial Services Inc.," the bank's broker-dealer.
The money market account, called Signet Investor's Money Plus, boasted an annual percentage yield of 5.90% on Feb. 6. That was more than double the 2.79% average for bank money market accounts and even topped the average 4.60% yield on six-month certificates of deposit, according to Bank Rate Monitor, North Palm Beach, Fla.
The money market account features a $2,500 minimum; a free debit card; and unlimited, no-minimum check-writing privileges, with three free checks per month.
Signet, an $11.4 billion-asset bank, has also prominently touted the "ironclad security" of federal deposit insurance in a mailing for the product. That distinguishing feature may be the sweetener to attract customers to a fuller line of investment products.
Signet officials wouldn't discuss which regions and demographic markets were being targeted in the direct mail campaign.
But if the money market account becomes widely available, it could put a foot in the door to sell other funds, observers said.
Signet could use "this as the loss leader to begin this relationship to cross-sell the Blanchard Funds," Mr. Dinkin said.
Since 1982, banks have been able to offer market-sensitive accounts that include FDIC insurance for balances as high $100,000. The peace of mind of federal insurance is something even bank-managed mutual funds can't supply.
Signet is known in banking circles for applying cutting-edge direct market research in its effort to sell products and services.
"Especially in the credit card area, they have been extremely sophisticated in their data segmentation and analysis," said Anne Moore, president of Synergistics Research Corp., an Atlanta-based consulting firm.
Two years ago, Signet largely spun off its credit card business into Capital One Financial Corp. But the company retains a strong tradition of quantitative testing.
Last year, Signet bought Sheffield Capital Management, a mutual fund company specializing in selling no-load funds by mail. Several consultants said Signet may be testing what it takes to tempt customers to bring their investments to the bank.
"This could be designed ... to get information about how people will react," said Geoffrey R. Bobroff, a mutual fund consultant based in East Greenwich, R.I.
