Countrywide Credit Industries, the largest independent mortgage company, is gearing to offer mutual funds to its borrowers.
In July its Countrywide Fund Services will start hawking on a limited basis the fund family it bought last year, said Tom Boone, managing director.
But the Calabassas, Calif.-based lender won't stop there, he said. Eventually it will offer multiple services and products to its institutional clients as well as its mortgage borrowers.
After a failed attempt in 1994 to enter the mutual fund business, last year Countrywide bought Leshner Financial Inc., a Cincinnati-based company with $1.1 billion of mutual fund assets. Lesher also provides fund accounting services.
For now, Countrywide's 6,000 employees can buy the 15 retail funds through their 401(k) retirement plan, Mr. Boone said.
Gareth Plank, an analyst at UBS Securities in San Francisco, predicted Countrywide's larger plan would succeed. Mortgage lenders have more information than other financial services companies-credit card companies, for example-about their customers, he said.
"Can you suggest to someone with $200 extra a month that they were putting toward their mortgage to put that in mutual funds?" Mr. Plank asked. "Absolutely."
He warned, though, that financial service companies should not try to sell all products to all customers.
One mutual fund consultant was more pessimistic. Direct marketing mutual funds to mortgage customers is not a natural form of distribution, said Richard Ross of Fifty-plus Communications Consulting, Glencoe, Ill. No company has successfully cross-sold numerous financial products to customers, he added.
"Direct-market buyers by definition are more attuned to market information," Mr. Ross said. "They don't make decisions based on what is directly marketed to them. That information can help inform them, but decision-making is not based on that."
Direct marketing of mutual funds is successful only when the customer has already expressed interest in mutual fund investing, Mr. Ross said.
Countrywide Fund Services joins a family of varied financial services and products. The parent company and its subsidiaries offer annuities, life insurance, and homeowners insurance to retail customers. Countrywide Credit's asset management arm has about $250 million of assets under management for pension funds and wealthy individuals.
The diverse company can also offer back-office services like fund accounting to its capital-markets customers, Mr. Boone said. Small institutions that borrow from Countrywide's correspondent lending division to make mortgages can now invest some of their excess cash in the fund division's short-term money instrument and tax-free funds, he added.
Countrywide executives learned from the mistakes they made the last time they tried to sell investments, Mr. Boone said.
"Last time it was a limited offering and it didn't have the Countrywide name on it," he said. "This time it's part of the Countrywide family."
