Branches will be banks' biggest advantage in the 1990s for selling mutual funds and other retail products, says John B. McCoy, chief executive of Banc One Corp.

Just 10 years ago, when direct mail and telemarketing were proving successful, Mr. McCoy was thinking about jettisoning branches, he told more than 200 bankers recently at a conference sponsored by the Council on Financial Competition in Washington.

But no more.

Banc One credits a sizable portion of its fund sales to the existence of a large branch network. "A lot of it is just the customer walking in saying, give me the facts," he said.

Wire Houses Follow Suit

Even top telemarketing firms like Fidelity Investments are moving toward branches.

"They are opening offices on the ground floor because they can't get the customer," he said.

"Some lights go on [in an investment center], and the customer just walks in," he said.

The lights are going on in Columbus-based Banc One's 400 largest branches in the form of personal investment centers. These are areas within branches dedicated solely to the sale of investment products.

And banks have to sell funds because customers demand them, Mr. McCoy said.

But, he warned, banks also have cultural obstacles to overcome in gearing up these programs that brokerage houses don't have to deal with.

Paying generous commissions to securities salespeople who work near traditional banking employees can generate friction, he said.

"We've created real inequities," he said. "I just don't think that leads to good will over time."

While that problem has yet to be solved, he sees other cultural problems beginning to ease.

Banc One employees used to have "selling angst" about mutual funds. Now that is gone, Mr. McCoy said.

The change came largely from the use of an accounting method in which all the money from fund sales is credited completely to the branches, Mr. McCoy said.

"Banc One people don't believe in shadow accounting added, referring to an approach that gives "shadow" credit to the bank unit that referred business and actual credit to the unit that makes the sale. Under this system, branches often get only the shadow credit, while the fees are credited to a securities unit.

Glad Tidings

The assertion hit a chord with some bankers. William Kauper, vice president in charge of mutual fund sales at Security Bank in Milwaukee, said driving all fee income though the bank is preferable to the gyrations of shadow accounting.

Mr. Kauper and Security senior vice president Thomas J. Reuteman added that Mr. McCoy's statement about the growing importance of branches was welcome news.

"It's going to be what happens," Mr. Reuteman said. "Customers are going to start coming back to the branches."

"I think he really simplified our challenge -- and that's what leaders do," Mr. Kauper added.

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