As banks started jumping into the investment products business four years ago, three distinct types of service companies entered the scene with a slew of promises.

Distributors of bank proprietary funds were knocking at the bank door, helped by federal laws that prohibited banks from acting as distributors of their own funds. Each distributor promised the expertise needed to grow these funds through channels that included personal trust, private banking, retail branches, and 401(k).

Third-party marketing firms - companies that provide brokers to banks - were there ready to help erect sales infrastructures. They convinced banks that they could install turnkey marketing and sales programs through the branches. They promised that banks could learn from them how to transform themselves into a sales culture while not damaging their retail customer franchise.

Even nonbank mutual fund companies, seeing opportunities for growth by selling through banks, offered their own set of promises. These included marketing brochures and sales training programs.

During the past four years many banks believed these promises. Since July 1991, 46 banks got into the business of building their own mutual funds, according to New York research consultants Strategic Insight.

But did the banks get what they were promised? It appears not.

The numbers tend to disguise the real situation. According to Strategic Insight, while total proprietary fund assets grew from $1 billion to $275 billion over that period, almost half of that growth came from money market funds.

Let's take a closer look at the unmet promises.

*Most cross-selling efforts, especially to banks' affluent customers, have been disappointing. The penetration of mutual fund sales into this market averages less than 3.3%, according to Tampa-based researcher PSI. Just because private bankers and personal trust clients have high-net-worth clients doesn't mean that they buy mutual funds from their banker. The typical strategy of providing training, incentives, and expensive brochures is not the whole answer.

*Sales of mutual funds through the branch network have also been disappointing. The selling focus two years ago was geared primarily toward income-oriented customers who were looking for alternatives to low-rate CDs.

This type of sale was easy to make and there were plenty of customers eager to listen. But, by focusing only on this narrow segment, banks failed to cultivate potential new business based on customers' long-term investment needs. The result is that customers still go to brokers, not their banker, for their long-term investment needs.

*The experience of inviting outside sales organizations into bank branches has not left banks with a model for transforming their organizations into quality sales cultures. The sales process was often unsuitable for the customer, leaving compliance problems in its wake. Compensation based on transactions was often counter to relationship building. The result is that dozens of banks have taken their programs in- house during the past four years.

As it did four years ago, the potential for banks as manufacturers and distributors of mutual funds remains. The demographic data continue to paint a picture of continuing growth for mutual funds.

The aging baby boomer population of 80 million is now only 12 to 15 years from retirement. They are now in their prime years of asset accumulation.

But capturing a larger share of their customers' investment dollars remains elusive for banks. PSI data show that banks sold 4% of all fund dollars in 1994, while Fidelity alone sold 10%.

Banks are well aware that the key to success is distribution. Success means going beyond the narrow base of customers who are willing to buy mutual funds from their bank and winning over those who are now buying funds directly over the phone or through their brokers.

Rather than turn away, banks should redouble their efforts to build their share of the retail market. A first step is to turn to the distributors, third-party marketers, and nonbank fund companies that promised distribution success and say, "We're not there yet. I expect more. I demand more."

Mr. Rose is a principal of Alexander S. Rose Co., Boston, which advises financial services companies on marketing.

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