Charter One Bank is an old hand at selling annuities, and now the Cleveland-based thrift is leaning on that experience to help it sell mutual funds.
The $5.8 billion-asset thrift, the largest in Ohio, launched Charter One Investments last week to sell mutual funds and provide financial planning and discount brokerage services to its customers.
Charter One decided to create an investments unit because it has been losing customers to other financial institutions and brokerages in the area, said John D. Koch, the senior vice president in charge of the division. He said he has high hopes that the new service will keep customers in the Charter One fold.
The thrift is no stranger to the marketing of investments. It started selling fixed annuities seven years ago, when it launched an insurance subsidiary, First Northern Insurance Co. Since 1988, it has sold more than $200 million worth of fixed annuities.
"We were having success selling annuities, but the more we penetrated our market, the more people were telling us they wanted mutual funds as well," Mr. Koch said.
By all accounts, however, Charter One is coming into the fund business at a rough time. Mutual fund sales have dwindled at many banks, but Mr. Koch said he's confident that "the worst is behind us."
Charter One is hoping that by offering portfolios from some of the biggest "brand name" fund companies it will entice customers to use the new services, Mr. Koch said. The thrift is offering portfolios from Franklin Resources Inc., Oppenheimer Management Corp., Massachusetts Financial Services, Putnam Mutual Funds, and Capital Research and Management, purveyors of the American Funds.
Included in the mix of funds are balanced, growth and income, international, global equity, and municipal and corporate bond portfolios. Fees for the funds vary, but will include front-end, back-end, low-load, and level-load sales charges, Mr. Koch said.
The thrift has 24 sales representatives who will sell investments throughout its 96-branch network. Two-thirds of Charter One's sales representatives are licensed to sell mutual funds and annuities. The rest have credentials to sell a broader variety of investments, including individual stocks and bonds.
All investment transactions will be handled by Locust Street Securities, a Des Moines-based brokerage firm that works as a clearing house for banks. Mr. Koch said that by choosing a smaller, lesser-known firm like Locust Street, the thrift can "save money while getting top-notch service and trade execution."
"The margins are very tight in the sales of mutual funds and you have to take a very sharp pencil to the costs involved," he added.
Mr. Koch acknowledged that "there's not a huge amount of money to be made in mutual funds." However, he said Charter One was getting into the business because banks and thrifts have to offer an array of financial services if they are to retain customers.
