JUST ABOUT every banker knows that mutual funds will be critically important in the 1990s. The tougher questions are: How much potential does each local market have? What kind of resources should a banker devote to the sales campaign?

Earlier this year, these questions were nagging Joseph Middleton, general manager of California Federal Bank, the Florida arm of CalFed Inc.

Mr. Middleton knew that his biggest branch, in Tamarac, Fla., was fertile ground for mutual funds and annuities. After all, it was located just west of Fort Lauderdale in the midst of many retirement communities. But he was unsure exactly how fertile it would prove.

On his own, Mr. Middleton figured that he could get by with one sales person on the Tamarac job. But experts he brought in disagreed. They were from Invest Financial Corp., a unit of Chicago-based Kemper Corp. For nearly a decade, Invest had been selling mutual funds and annuities in branches of Los Angeles-based CalFed, a thrift with more than $17 billion in assets.

Using proprietary software, an Invest team studied the Tamarac market area, zip code by zip code. They also studied the branch, analyzing the composition of deposits as well as use of existing products, such as individual retirement accounts and money market accounts.

A general rule: Branches with a higher proportion of certificates of deposit are good prospecting ground for mutual fund sales. By contrast, a branch that's loaded with passbook savings accounts is usually a tougher call. Blame it on conservative customers.

Lastly, they studied the spending patterns of Mr. Middleton's customers through credit service companies, which track consumers' use of credit and charge cards, along with their borrowings and payments on bank loans.

The conclusion: Two salespeople were needed. And they came on board in July.

"If you would have told me two years ago that the Tamarac branch would have two salespeople, I wouldn't have believed it," said Mr. Middleton.

If banks are to keep their most profitable customers, selling mutual funds with the right level of effort will be crucial. Right now, Mr. Middleton has 25 Invest salespeople working in his 42 branches scattered around Florida. By yearend, the number of Invest reps is expected to increase to 29.

Mr. Middleton declined to state how much money Invest's products bring in for his unit, but he did say that the first quarter set a record. For CalFed as a whole, sales of mutual funds and annuities were $358 million in the first six months of 1992, up 63% from the comparable period of 1991.

Even so, the revenue generation is only part of the benefit Mr. Middleton believes his unit gains from providing customers easy access to these products. By selling a broad range of products. California Federal promotes its image as a full-service financial company. which helps keep customers in the competitive Florida market.

Roughly half of all banks sell mutual funds and insurance products, whether they manage those funds themselves or just receive a commission for passing along customer leads to big mutual fund and insurance companies.

CalFed helped found Invest in 1982. It subsequently sold the company to Kemper but continues to sell Invest funds and annuities through its 120 branches in California.

In California, CalFed's own employees sell the Invest products. In Florida, however, the arrangement is different. Florida is one of 17 states that prohibit banks from selling insurance, though they can sell mutual funds. At California Federal in Florida, Invest salespeople sell both types of products. Invest, the biggest third-party provider of mutual funds and annuity products to banks, with $2.6 billion in sales in 1991, pays California Federal rent for the office space, which keeps the thrift in compliance with Florida's laws that prohibit insurance sales.

California Federal employees refer customers who are interested in investment products. And Invest does its own marketing as well.

The arrangement didn't always work well. Until 1990, sales were slow, and no one really pushed the products--neither Invest nor California Federal. As recently as 1989, there were only five full-time sales representatives from Invest in CalFed's Florida branches.

"We just weren't paying attention," said Merlin Gackle, executive vice president of Invest.

What got Mr. Gackle to pay attention was partly Invest's new software that allowed him to forecast how much sales a branch should generate. Before 1991, this type of microscopic view of a branch, its deposits, and customer demographics was no possible.

One thing Mr. Gackle found is that a branch doesn't need $100 million in deposits to generate sizable business in mutual funds and annuities, which was the old rule of thumb. A branch can be as small as $30 million in deposits and warrant at least a part-time salesperson, depending on the socioeconomic makeup of the neighborhood and the depositors.

Invest's forecasting ability, which it shares with bank customers, jibes with Mr. Middleton's emphasis on instilling a sales culture at CalFed.

Unlike the vast majority of bank managers, who have spent all of their careers in the industry, Mr. Middleton, 60, cut his teeth in retailing. Before he joined CalFed in California as a regional manager in 1987, he was a manager with the Broadway department store chain in California. In 1988, he made a lateral move to CalFed's Florida unit.

"It was traditional here in banking terms - courteous service, good personal relations with customers," said Mr. Middleton. "But not as aggressive in sales as it could have been."

But he couldn't sell without the products. "If you are creating a selling climate, you have to have a complete assortment of products to satisfy the customers," said Mr. Middleton.

At a Glance

CalFed Inc. Headquarters: Los Angeles Assets: $17 billion Employees: 3,000 Net Fee income 1989-91:1989 $56.3 million1990 $49.6 million1991 $66.0 million

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.