The competition for access to bank brokerage customers is intensifying as mutual fund companies regroup after a tough third quarter.
Executives at bank brokerages say they are suddenly fielding more phone calls from fund company salespeople and getting more requests for face-to- face visits. Advice on boosting sales is pouring in by fax, and fund companies' investment experts are increasingly available via conference call.
Some bank brokerage chiefs say the contest for their attention has not been this intense in years.
"It definitely has heated up since the market went down" about three months ago, said Curt Anderson, president of First Busey Securities, a unit of $1 billion-asset Busey Bank in Urbana, Ill. Mr. Anderson, who said he hasn't seen this much traffic since the early 1990s, said the surge actually began about nine months ago as fund companies began vying more aggressively for shelf space.
He said mutual fund salespeople used to visit First Busey Securities once every three to four weeks. Now he has visitors scheduled every week until the end of December.
It's easy to see why fund companies are revving up their sales efforts. Though the market has steadied in recent weeks, mutual funds are still nursing their third-quarter wounds. In August, $11.2 billion flowed out of stock funds, compared with an inflow of $19.5 billion in July, according to the most recent data from the Investment Company Institute.
As a result, growth expectations have diminished, and some fund companies are bracing for little or no growth, said Dean Eberling, an analyst at Putnam, Lovell, de Guardiola & Thornton Inc. in New York. The sales efforts are "tied in to trying to maximize the levels of assets under management and therefore earnings," he said.
The signs are evident even at community bank brokerages, which, because they lack the scale of big banks, have come to expect only modest attention from fund companies.
Mutual fund wholesalers who used to call two to three times a week are now calling five times a week, said Lisa A. Fay, who runs the investment program at Stock Yards Bank and Trust Co., a $530 million-asset bank in Louisville, Ky. Wholesalers are middlemen between banks and fund companies.
Ms. Fay said she has also received more requests from wholesalers to meet with her in person. One of those was a wholesaler from John Hancock Funds Inc. of Boston who had not called in two months, she said.
Bank brokerages certainly aren't the only objects of the fund companies' ardor. Executives at fund companies say similar efforts are under way in other sales channels.
By stepping up contacts with clients, "you plug the outflow of assets, and hopefully at the same time, you attract new investors as well," said H.G. "Toby" Mumford, director of financial institutions sales at Franklin Templeton Group, San Mateo, Calif.
But banks are seen as especially receptive to the fund companies' overtures. "Banks lean on the fund groups to help train and develop their ability to distribute investment products," said Burton Greenwald, a consultant to the mutual fund industry.
The fund companies' increased interest, exclusive or not, has given bank brokerage chiefs a renewed sense of power in their dealings with these vendors, who have long craved access to the banking industry's vast retail customer base. "We will spend time with the ones that spend time with us," said Mr. Anderson of First Busey.
Observers said it is only natural that fund companies are pushing harder for business now.
"When there's a bull market, you don't really have to do anything to make money," said Joy P. Montgomery, president of Money Marketing Initiative, a consulting firm in Basking Ridge, N.J. "But when the bull turns into a very turbulent situation, then you need a lot more effort to get the same amount of return."
Some fund companies have organized more frequent conference calls with market strategists, economists, and portfolio managers.
"They have them on a regular basis anyway, but the level has increased in the market volatility," said Ed Hipp, president of Centura Securities Inc., Rocky Mount, N.C., whose parent, Centura Banks Inc., has $7.8 billion of assets. Mr. Hipp said that many of the conference calls offered are with emerging-markets fund managers.
Hand-holding is crucial in guiding bank clients through a difficult time, fund company executives said.
"Comfort level is very important during times like this," said Michael C. Vessels, a senior vice president and national sales manager at AIM Management Group, Houston. He said that helping clients survive a volatile market strengthens relationships: "People remember those that help them through difficult times."
Lee Cary, program director for brokerage operations at U.S. Trust, a $5.5 billion-asset Boston bank, said he has received literature from mutual fund companies on how to deal with customers in volatile markets, as well as sales ideas and information about their products. "I just think they're trying to get more awareness of what they have," he said.
There is a downside to all the attention, said Mr. Anderson. Within the last month, he has had sales ideas faxed to him two to three times a day from the same company. "Flooding us constantly with information is annoying," he said.
Meanwhile, companies whose funds are not on a bank's list of preferred offerings are also expanding their sales efforts, said Merritt Talbot, sales manager at Hibernia National Bank's brokerage. Hibernia has $13.3 billion of assets.
He said he has gotten about 25% more calls than usual, primarily from companies selling fixed and variable annuities who are "trying to get on board."
