Banks, stung by past criticism of their sales practices, do a better job than brokerage houses and insurance firms in educating customers about investment product risks, according to a new study.
But the study, conducted by Prophet Market Research, a San-Francisco- based consulting firm, concluded that banks' brokers were harder to reach than their counterparts at other financial institutions.
And bank brokers did a poorer job in closing sales than insurance and brokerage house salesmen.
The comparative study, released earlier this week, was based on the results of three national audits of investment sales practices at 86 large U.S. stock brokerage, banking, and insurance companies. During the audits, Prophet employees posed as unsophisticated investors with about $35,000 to invest in securities.
The audits, each of which focused on one of the three industries, were conducted between June 1994 and April 1995. The American Bankers Association commissioned the study comparing the three audits after learning that the banking industry fared well in certain categories.
"These guys in the banking industry aren't perfect," said Scott Galloway, a principal at Prophet who helped develop the study. "But they have been under a tremendous amount of scrutiny, and it's resulted in them making sure they run a tight ship."
Mr. Galloway said that the ABA's sponsorship of the comparative study in no way influenced the results. He said that all the data were collected before the banking trade group become involved.
James D. McLaughlin, an ABA official who oversees investment products issues, said that bank brokers are often hard to contact because many are responsible for several branches.
Of the conclusion that banks were less effective at closing a sale than their counterparts, he said, "it was disappointing because I thought we had overcome that."
