Why have some mutual fund companies made significant inroads at bank brokerages while others can't even get in the door?
In part, titans like Putnam Investments and Franklin Resources have been the dominant sellers through banks because they got started first and have been promoting themselves since the early 1980s.
But even these companies understand that the key to remaining solid players is to pony up support services to bank brokerages.
"The fund companies that best offer training and marketing support - as well as good products - will be the winners," said Richard Ayotte, managing partner of American Brokerage Consultants, St. Petersburg, Fla.
A recent study by Mr. Ayotte shows that much scrutiny goes into picking a fund vendor. A survey of 420 banks found that the financial condition of a company was the No. 1 of eight criteria, with 71% of respondents citing it as their top concern.
Surprisingly, name recognition ranked last. But Mr. Ayotte said if a bank is interested in objective advice-giving, the fund company's recognition among customers shouldn't matter.
Marine Midland Banks reviews its list of seven fund providers every quarter, said James Thacher, senior vice president in the Buffalo, N.Y.- based bank's investment services division.
Funds selected for sale must rank in the top 35% of their peer group. Management charges must be in line with the peer group. Funds can't show a history of volatility. And name-brand recognition is a plus. "We don't have anybody on our list that isn't recognized by the average customer," Mr. Thacher said.
Bank brokerages also want help training their sales staff to diversify customers' investment portfolios, to make sure the bank is giving proper advice, said Michael Rom, assistant national sales manager at Franklin Resources, San Mateo, Calif.
"You can't control the market, but you can control the behavior of the reps and how they deal with clients," he said.
