Building on a tradition of serving ethnic clients, a Chicago thrift is looking to Polish, German, Czech, Jewish, and Hispanic clients to help its investment product program grow.

Liberty Federal Bank executives say members of ethnic groups accounted for about 15% of the bank's $40 million in investment sales last year. And that share is likely to expand as the ethnic population and its financial clout continue to grow.

"Early on we recognized there is more to their balance sheet than their deposits," said Kenne P. Bristol, president and CEO of Alliance Bancorp, a $1.3 billion-asset holding company formed this year from a merger of Liberty Bancorp and Hinsdale Federal Bank. Both banks in the merger of equals had strong ethnic foundations, Mr. Bristol said.

Since 1982, Liberty Federal and its predecessor, Liberty Bancorp, have used Invest Financial Corp. to sell investment products through branches. When the market has done well, so has Invest's program, Mr. Bristol said.

Edward P. Munin, senior vice president of Liberty Federal and program manager for the bank's Invest program, said he expects $50 million in sales in 1997 with a growing share of ethnic sales. He oversees the 10 investment representatives who market mutual funds and annuities through the thrift's 14 branches in the northern suburbs of Chicago. All hold Series 7 licenses, enabling them to sell a full array of investments, and are dual employees of the thrift and Invest.

Despite evidence of the increasing economic power of minorities- Hispanics alone wielded $220 billion in purchasing power in 1995, according to Hispanic Business magazine-consultants say a majority of banks pay little attention to the population segment.

Liberty Federal is an exception, Mr. Bristol said.

The thrift markets to ethnic customers who are fairly well established in the United States, making it possible to reach out to prospective investors without having to recruit a multi-lingual sales force. Some have been in the United States as long as 30 years; some are the children of immigrants. Instead, Liberty emphasizes cultural understanding, said Mr. Munin. "It's not so much the language-it's that our tellers are ethnic."

Some observers have doubts about the value of singling out ethnic groups for special attention.

"Sometimes we get carried away with the segmentation," said Roger Thomas, a bank consultant based in Columbus, Mo. "Everybody want to save for college, everybody wants to retire, everyone wants to care for aged parents-these wants and needs are universal."

Ethnic groups don't differ that much financially from other prospective investors, he said, so banks shouldn't view them as different. He said some common-sense moves-for instance, putting a Spanish-speaking investment representative in a branch in a Latino neighborhood-are usually all it takes to reach them.

But Mr. Munin sees some subtle differences between immigrants and first- generation Americans and the rest of his customer base.

For instance, he said, the ethnic groups Liberty serves are heavily influenced by referrals-much more so than other customers.

He pointed to a young Korean teller who has been successful in introducing other Koreans to the investment program. The Korean customer is unlikely to go to the thrift without some personal referral, he said. That the resulting sales meeting can be with a non-ethnic employee is far less crucial than that first contact.

Overcoming customers' wariness also can be a big hurdle for banks serving ethnically diverse markets, said Kevin Tynan, president of Tynan Marketing Inc., a Chicago-based consulting firm.

Hispanics from Mexico, Puerto Rico, or Cuba, for instance, may have a deep distrust rooted in memories of bank failures, corruption, and fiascoes involving sales of nonsecured investments, he said. They may also view banks as places for the affluent, not the average person. Unfamiliar with the strictly maintained controls on U.S. banks, they give a lot of weight to referrals.

Liberty rewards employee referrals with a $20 incentive and runs contests giving top tellers special rewards, such as coveted tickets to Chicago Bulls basketball games, Mr. Bristol said.

The thrift also organizes barbecues, meetings with church groups, and educational seminars to get the word into the ethnic communities. Advertisements are run in ethnic publications as well.

Within the ethnic communities, the bank has been more successful attracting assets from middle-market customers who are more likely to drive a six-year-old Buick than a late-model sports car and who have money to invest. Some typical investors own businesses such as dry cleaning stores, restaurants, and car washes, Mr. Munin said.

The customers are "grassroots America," Mr. Bristol said. Although they may not have a large net worth, they want to "work and save and pad their retirement."

Mr. Tynan said Liberty's focus on long-settled ethnic customers makes sense, because they are stronger prospects for investment products than are recent immigrants. Newcomers typically have a greater need for borrowing, Mr. Tynan said.

He said banks for the most part are perplexed over how to market to ethnic groups and fall into four classes: those with no ethnic outreach, those with some efforts forced by the Community Reinvestment Act, those that make translated brochures available, and those that take an encompassing cultural approach.

Simply translating brochures is risky, because the bank could offend a group through an inadvertently misused phrase. Such cases have chilled some banks and made them wary of committing a costly faux pas, Mr. Tynan said.

He said using a cultural approach to build a relationship with an ethnic customer is the key to succeeding in the marketplace. Once the ethnic customer is in the bank and trusts it, he will be tenaciously loyal and resist the urge to hop to competitors over price or other concerns, he said.

Mr. Munin gives an example of the types of relationships his brokers have with ethnic customers. He recently observed a broker arranging numerous meetings for a client with other businesses in the community. "If a gutter is leaking she can recommend someone," he said with amusement. In the next few months, Liberty will add a broker who speaks Spanish, Mr. Munin said.

"If you just read the demographics, it's going to be important," Mr. Bristol said. That will force more banks and brokerage houses to develop strategies to serve the market, he said.

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