Mutual fund companies that sell their wares through brokerage firms are a defensive lot these days.
Several executives at such firms met at a trade conference in New York earlier this week to try to discourage a growing perception that investors prefer side-stepping brokers and putting their money into mutual funds that market directly.
"Investors are becoming more knowledgeable," said Bridget A. Macaskill, chief executive of OppenheimerFunds Inc. "But rather than a shift toward individual selection of mutual funds we see a trend in the opposite direction."
She argued that even investors in mass-marketed no-load funds are getting advice, pointing out that of the cash flows into direct marketing fund companies, 50% came from either fee-based financial planners or institutional money.
Still, companies like OppenheimerFunds, which continue to sell all their funds shares through financial intermediaries, have been steadily losing ground over the last few years to companies which market directly to investors.
The competition has plagued these companies enough that 71 of them - including the fund families of Citicorp and Chase Manhattan Corp. - created the Mutual Fund Forum two years ago to educate investors about the role of financial advisers.
On Wednesday, executives from OppenheimerFunds, Aim Management Group, Putnam Investments, Merrill Lynch & Co., and Edward D. Jones & Co. said their studies show that baby boomers have saved only one-third of what they need for retirement, and are asking for advice.
They said, however, that banks, while well-positioned to capture this market of investors, still aren't up to speed in offering comprehensive financial advice.
"Banks have a particular advantage to capture first-time investors, but they need to build more training programs and financial planning to a greater extent," said Ms. Macaskill.
Added John Steffens, executive vice president with Merrill's private client group: "Banks are clearly going to work on getting better and better at our business."
Last year, fund companies that sell through financial intermediaries garnered 48.3% of total mutual fund sales, down from 51.2% in 1994 and 53.4% in 1993, according to the Investment Company Institute.
Data from the Washington trade group shows that the direct marketing mutual fund companies drew in 42.2% of total sales last year, up from 40.5% in 1994 and 39.2% in 1993.
Banks that manage their own funds play down the threat of the direct marketing companies. "I don't think you'll find as much competition as you think: each fills their own niche," said David Kundert, chairman of Banc One Investment Management and Trust Group, in a phone interview.
