they value fund companies that bolster good market performance with hands- on customer service. In its annual service quality awards to mutual fund companies, Dalbar Inc. singled out five fund companies that sell through banks. The five - John Hancock Funds Inc., Van Kampen Investments Inc., Fidelity Investments, Kemper Funds, and Putnam Investments - were among eight fund companies given accolades for the quality of their written and telephone communications with shareholders. And for the most part, bank brokerage chiefs agree with Boston-based Dalbar. While Dalbar monitors 64 mutual fund companies nearly every day for its annual study, which gauges the experience of a "typical" customer, banks set their own standards for determining the providers that will get most of their business. The service award, given in January, is one of a handful of awards Dalbar gives to mutual fund and annuity companies. Banks typically review their mutual fund partners at least once a year. Factors for making their "A-list" of preferred providers include brand recognition, product breadth, and expense ratios. But brokerage chiefs say that the most important factor, assuming that the funds are good performers, is the quality of sales support the brokers receive. "Good strategic partners don't just come in and talk about their products," said Rob Comfort, senior managing director of the brokerage unit at Huntington Bancshares, Columbus, Ohio. "They come in with ideas and vision on how to help you grow your overall business and through that value they bring, they earn a good piece of that business." In most cases, the bank brokerage heads said they were satisfied with the level of service provided by the fund complexes cited by Dalbar. Factors they look for include response-time on questions to fund company representatives, their knowledge, and how helpful they are. Good fund companies also work hard to support a firm's sales efforts, and provide high-quality sales and marketing literature, brokerage chiefs said. Putnam was mentioned a few times for the quality of its broker training programs and speakers such as economist Dr. Bob Goodman, who discuss market events and other topics of interest to brokers. Fidelity, Kemper, and Van Kampen were also given high marks for the quality of their speakers. John Hancock received praise from two bank brokerage chiefs for its efforts to build business at their small firms. For example, at Busey Investment Group, the wholesaler stops by at least once a month, more often than wholesalers at other fund companies on the short list, said Curt Anderson, the president of brokerage at First Busey Corp., Urbana, Ill. And whenever Busey Investment Group hires a broker, John Hancock sends the person to Boston to meet the company's portfolio managers and management team. In addition, the marketing material John Hancock has is "user- friendly," making it easier for brokers to sell the company's funds, Mr. Anderson said. Joseph Cooney, the president of First Security Corp.'s brokerage unit, said Van Kampen and Fidelity had been "very, very quick to support our sales efforts and very good to respond" to problems such as the rare occasion when a trade has to be cancelled. They always follow up on issues "as opposed to just sitting on it and letting it lie on someone's desk for awhile," said Mr. Cooney, who is also chief executive officer of the Salt Lake City banking company's brokerage. The quality of marketing materials is another factor brokerage chiefs said they considered in determining what makes a good partner. Merritt Talbot, who heads the brokerage business at Hibernia National Corp. of New Orleans, said Fidelity had designed a particularly good asset- allocation package for brokers. Fidelity puts together a color presentation that shows how much a customer would have accumulated if his or her money were invested in Fidelity's funds over a certain period of time, based on past returns. "It makes the broker look more professional when he's sitting down with the customer," Mr. Talbot said. Another area important to banks is the ease of resolution when mistakes occur. "How well they're addressed is what I say marks the difference between good service and excellent service," said Jack D. Cussen, chairman and chief executive of Summit Financial Services Group Inc., a unit of Summit Bancorp., Princeton, N.J. Service by many of the mutual fund providers became "spotty" in the mid 1990s because of the high volume of sales, but companies including Fidelity, Kemper, Van Kampen, and Putnam have made a "clear and conscious" effort to change that, Mr. Cussen said. But some brokerage chiefs complained that they did not see enough of the fund company wholesalers who are responsible for providing product and sales support to brokers. Gregory D. Heffington, who heads sales of Van Kampen Funds through financial institutions, said that bank clients, particularly over the past six months, had been more vocal about the wholesaling support they receive. Some request reports only once a year, but others are asking for them monthly or quarterly. "It was not something they asked for in the past," he said. "But more and more they are saying, 'What are you doing for us?' " Van Kampen, whose bank distribution accounts for 22% of its sales, monitors wholesalers weekly to help ensure that their coverage is adequate. "Nobody's interested in having you on a list if you never call on them," Mr. Heffington said. Still, no method of monitoring is foolproof and fund executives said it is extremely difficult to satisfy all of their bank clients all of the time. To be sure, several fund companies received mixed report cards on their wholesaling efforts. Ed Hipp, the president of brokerage at Centura Banks Inc. of Rocky Mount, N.C., said it boiled down to this: Do fund companies spend time developing future business, or trying to deepen relationships with firms that are already highly profitable? Take Putnam, the largest distributor of mutual funds through banks, as an example. Though some bank brokerage chiefs praised Putnam for the lavish attention it gives their firms, others were highly critical. Some brokerage houses said they dropped the firm from their short list because they were not receiving enough support. Vincent Esposito, the director of client relationship management for Putnam, said the fund company determines how to allocate its resources based on a variety of factors such as a brokerage firm's assets under management, sales potential, product mix, and capacity of wholesalers to cover a particular territory. He said that Putnam has bolstered its wholesaling force through banks by 15% this year, and is building a more sophisticated relationship management system. Because Putnam is on almost every bank broker's list, it is much more difficult for its staff to get out and see brokers often, especially if the wholesaler is covering three or four states, said Stephen Angelis, who heads the brokerage arm of CCB Financial Corp. of Durham, N.C. Indeed, Mr. Angelis said he had seen more activity from Putnam's wholesaler since his territory was reduced. "How's the rep going to get out and see 1,500 brokers?" he asked. Sometimes, however, the activity level of the wholesaler is a function of the individual, not the company, brokerage chiefs said. Hugo Ernst, the president of the brokerage arm of Wichita, Kan.-based Intrust Financial Corp., said sales of Putnam's funds had increased since November 1998, when a new wholesaler came on the beat. The wholesaler has run a training meeting, given economic outlooks, and has come into the bank at least six times. As a result, "I'm seeing more tickets come through with Putnam's name on it," he said. Though Mr. Ernst said it made "good business sense" to concentrate efforts where the sales are, he said fund companies needed to make sure wholesalers also called on those brokers with the potential for higher sales. "I think a lot of them are just focused on the business that's been coming in because the market's been too good," he said. u
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