AIM Set to Fight for Top Spot in Bank Fund Sales

AIM Management Group has put on quite a show for the last five years, coming from nowhere to become one of the four biggest mutual fund sellers through banks.

But the next act the company has planned-becoming the No. 1 seller through banks-promises to be a lot harder.

To catch the market leader, Putnam Investments, AIM must quadruple its sales, and to do that it must find a way to distinguish itself from the other top players.

"We are not content being No. 3 or No. 4," said Michael Vessels, the senior vice president who oversees AIM's retail bank sales.

"If our long-term goal was not to be No. 1, we shouldn't be in this business."

Prominence in the bank marketplace translates into hefty revenues: Banks account for 15% of all mutual fund sales, and AIM's bank division already brings in 18% of the company's overall sales.

Mr. Vessels predicted that a number of initiatives under way at the Houston-based fund company would propel it to the No. 2 slot by 2000 and to the top position eventually (he refused to be pinned down on a target date).

Many industry watchers doubt that AIM, which manages $90 billion of assets, can topple the market leader anytime soon.

Boston-based Putnam last year racked up $10 billion in new sales through banks, compared with $2.5 billion for AIM. Franklin Templeton, of San Mateo, Calif., was second with $4 billion.

AIM has solid fund performance and a solid distribution system. But other fund companies do too, observers said.

"I can't give you one area where they have stood above the rest of our wholesalers," said Cheryl Dalton, senior vice president at the retail brokerage arm of KeyCorp, Cleveland.

"I have not heard any strategies they've put forward ... to set them apart from other providers."

Louis Harvey, president of Dalbar, a Boston-based fund consulting firm, said AIM must dedicate more resources to bank distribution if it is serious about capturing the lead.

"I haven't seen their presence in banks the way I've seen some major competitors,'" he said.

But Mr. Vessels said AIM and its bank distribution business are transforming themselves and in time, will indeed stand out.

The company's merger with Invesco PLC last year-under a new holding company called Amvescap-gave AIM access to international and global funds and added value-style funds to its lineup of growth funds.

This year it also absorbed LGT Asset Management's GT Global mutual funds, gaining more international and global funds.

AIM is also working to develop sales training programs that can help banks build their overall fund sales business.

And over the past five years it has expanded its wholesaler corps to 16 from seven, including adding two wholesalers this year.

"We're very focused on the new look at AIM," Mr. Vessels said. "It's a huge task but it's exciting for us."

Mr. Vessels has made a believer of Centura Bancorp, a $6.3 billion-asset institution in Rocky Mount, N.C.

Ed Hipp, president of the bank's retail brokerage, said AIM and Mr. Vessels might not catch Putnam soon, but the company has the No. 2 position "locked."

"He's got the vision," Mr. Hipp said. "He's got the wholesalers focused and motivated."

Like many top executives around the mutual fund industry, Mr. Vessels honed his skills at the very company he is now trying to catch-Putnam.

He spent five years at the company as a wholesaler and regional manager before joining AIM in 1993.

All agree that AIM has made impressive strides in bank sales since that year, when it was the 13th-biggest player.

By adding wholesalers and naming key account managers to cultivate more business through their biggest bank partners, AIM parlayed its long- standing position as a top money-market fund provider through bank trust departments into success selling through their retail brokerages.

AIM got a little help from the sharply rising stock market, which fueled sales of its Charter, Constellation, and Value funds through banks and elsewhere.

It now stands neck-and-neck with OppenheimerFunds as the third-biggest seller of funds through banks.

"They were a late entrant into the market, and within a few years they've grown into a dominant position," said Maryann Bruce, Oppenheimer's bank sales chief.

"But I personally believe Oppenheimer has more potential in the channel, because I believe we have a broader product line."

As AIM has focused on its relationships with banks with at least $10 billion of assets, some smaller banks have found themselves getting less attention.

"Let's put it this way," said Curt Anderson, president of the retail brokerage at Busey Bank, in Urbana, Ill., a $1 billion-asset institution.

"We probably haven't seen an AIM representative here in two years."

Mr. Vessels said the company is working on that, but added that because 50 banks account for 80% of the fund sales through that distribution channel, there is a bias toward those big meal tickets.

Because AIM has risen largely on the strength of its equity products-its stock funds outsell its bond funds by 6 to 1-some say the company could suffer a reversal of fortune if stocks fall from favor.

Oppenheimer's sales ratio, in comparison, is more like 6 to 4 in favor of stocks.

Mr. Vessels agreed that could be a danger but said the company has a selection of fixed-income funds, including those it got when it bought CIGNA's fund family in 1992.

It simply must make the investment community more aware of them, he said.

"Our ability to get that word out," he said, "is taking shape as we speak."