A tiny firm that manages investment portfolios for individuals is trying to establish a presence in community banks by offering them a new asset allocation program.
Gateway Asset Management Co., New Canaan, Conn., is offering small banks a software program that diversifies the investment portfolios of customers among top-name mutual fund companies.
But unlike other asset allocation programs in which the bank broker selects the individual funds, Gateway performs this task, according to Jack Bonne, the company's president.
Most asset allocation programs merely tell a broker how much a client's portfolio should be weighted in the various classes of funds.
"Selection of the correct funds is far more significant to the success of a portfolio than merely determining the proper allocation," Mr. Bonne said.
Dubbed Select Choice, Gateway's program also offers a broader menu of mutual funds than most community bank asset allocation services offer, Mr. Bonne said.
Gateway, a five-year-old company that manages $10 million in assets, is offering funds such as Fidelity Investments, Vanguard, T. Rowe Price and Putnam Investments. Mr. Bonne said most community banks offer asset allocation programs provided by a single mutual fund company.
"The problem you run into is that you have very limited choices, and that is the antithesis to what the educated consumer wants today," he said.
Asset allocation programs are becoming popular at banks, particularly in trust departments. These programs are efficient ways for banks to manage the money of less wealthy trust customers.
Those customers who have less than, say, $500,000 to invest can't afford proper diversification through individual securities. So their trust officers put them in mutual funds.
Many community bank trust departments are demanding such products because they rely on a customer base that only has between $100,000 to $500,000 to invest.
At Bancorp Connecticut, which signed on Gateway six months ago, 75% of its trust customers' portfolios are in that range, said Robert Vocelli, financial services manager at the bank.
Until Gateway's program, the $380 million-asset banking company offered the asset allocation program of Wright Investors' Service, a small mutual fund company in Bridgeport, Conn. But that firm only allowed customers to put money into portfolios managed by Wright.
