WASHINGTON - When it comes to the sale of mutual funds and other uninsured products, banks should be held to higher standards than other financial institutions, says a senior officer at Wells Fargo & Co.
"We do operate in an environment where it is easy to confuse the consumer," said Dudley M. Nigg, executive vice president of the bank's savings and investment group.
Still, at a conference sponsored by the Consumer Federation of America, Mr. Nigg differed with a consumer advocate who called for legislation to ensure that consumers know that mutual funds sold through banks are uninsured.
"An active and aggressive regulator" can do more than legislation, he said, terming legislation "a very blunt instrument."
Moreover, it is in a bank's self-interest to make proper disclosures, he said.
"I can't prove that we sell more product by fully disclosing the risk, but I feel it in my gut," he said. "People trust us more."
Kent Brunette, a banking lobbyist for the American Association of Retired Persons, disagreed.
"The Office of the Comptroller of the Currency has issued regulations, and the Federal Reserve has issued its regulations," Mr. Brunette said.
Call for a Single Standard
"There is no single standard that applies to all of them," he said, adding; "There is definitely a need for Congress to make sense out of this marketplace."
Mr. Brunette told the consumer and industry representatives assembled at the conference that there are three types of banks selling mutual funds.
First, he said, are those that "are racing to the bottom" with advertisements that blur the distinction between insured and uninsured products.
Many institutions, he said, fall in a second class: those that are meeting minimum standards. "The New York money-center banks are doing a good job of meeting the minimums," he said.
Wells Fargo, however, drew praise as being in a class by itself in making disclosures.
Among other things, Wells has a sign on the desk of employees who sell investment products emblazoned with a circular logo that includes the letters "FDIC" with a slash through them - the universal symbol for negation.
In addition, mutual fund customers are called several days after making a purchase and asked whether they understood that the product they have purchased was uninsured.
Sales Can Be Undone
"Some say no, even though we are pretty sure they were informed," Mr. Nigg said. "We use the opportunity to educate them. And if they decide they don't want it after that, we unwind the sale.
"The last thing we want is for them to decide a year from now that they're unhappy," he said. "Because then they'll take all their accounts out of the bank, and tell all their friends."
Mr. Brunette told the audience that the trend in bank lobbies today "is toward hyping the uninsured products."
"Most of what passes for disclosure is legalese," added Maureen A. Thompson, senior partner in the Hastings Group.
