Looking for answers to the mutual fund marketing and distribution puzzle, bankers are expected to turn out in droves for the Investment Company Institute's annual general membership meeting in Washington this week.
Bankers in the fund business are increasingly realizing that their extensive branch networks are not providing the competitive edge they once hoped they would. Programs such as Charles Schwab & Co.'s OneSource - a no-transaction-fee mutual fund supermarket - are forcing banks to re- examine how they sell funds to their retail customers.
"Schwab has been able to deliver the credibility that banks thought only they had, and to deliver a higher level of service at a much lower cost," said Richard Ross, an investment-products sales consultant in Glencoe, Ill. "That's real competition."
"The distinctions between direct marketers and broker/dealers are blurring," added William M. Ennis, president of First Union Corp.'s Evergreen Investment Services. "People are looking for indications of the future." Mr. Ennis is participating in a panel discussion on distribution scheduled to take place at the conference today.
As of last week, more than 1,900 people had registered to attend the mutual fund industry's premier event, up from 1,400 registrants last year. The ICI does not break out how many attendees hail from banks, but the industry is expected to be well-represented at the confab, which began Monday evening and runs through Wednesday.
In many ways, bankers who go to the ICI are drawn to the event by the same issues drawing their nonbank brethren.
"Just like anybody who is there, you're coming to look at what are the growth dynamics and changes for the future in the mutual fund industry," Mr. Ennis said.
Still, some questions are weighing more heavily on the minds of bankers than on other fund industry participants.
Chief among them: regulation. The mutual fund industry is coming together on the eve of the deadline for filing comments on the National Association of Securities Dealers' proposed rules governing bank broker/dealers. Other regulatory issues particular to banks include restrictions on their ability to offer funds as part of a complete package of bank services - a practice known as tying.
"There are rules and regulations put on banks that affect their ability to impact" distribution, said Sarah Miller, government relations counsel at the American Bankers Association. She added that while some anti-tying rules have recently been eased, they have not been eradicated.
On other issues affecting distribution, Mr. Ross predicted that bankers will come away from the ICI event somewhat disturbed.
"At the conference, they get a bit of a reality check of how they stack up against other mutual fund providers," he said. "They come away shaking their heads because they are still behind the curve."
In addition to Schwab, Jack White and Fidelity Investments now have their own mutual-fund marts that allow consumers to buy no-load funds from various companies without paying sales load or transaction fees. These programs have proved formidable competitors to bank funds.
Moreover, the consolidated statements they send to consumers, which show all of their mutual fund investments, underline for banks the importance of service quality, another area in which they lag.
"Banks went into this business believing that their branches would give them enormous reach," Mr. Ross said. They also figured that simply because they were banks, "people would come," Mr. Ross added. "They have now found out neither was true."
The ICI has proclaimed the theme of this year's gathering as "Helping America Save for the Future." Indeed, the rapidly growing retirement market is an area of keen interest for many attendees, especially banks. As Mr. Ennis pointed out, banks have already done a good job getting a share of defined-contribution business. At the ICI, they will be looking for ways to parlay that into winning a piece of the larger retirement market.
Overall, bankers say their mood going into the conference is upbeat, as mutual funds remain wildly popular among investors. Mutual fund assets have been growing at a 30% clip this year, with total holdings breaking the $3 trillion mark in February. Banks command just shy of 14% of those assets.
"Anytime you go through such heated growth, there are always challenges that need to be hurdled," Mr. Ennis said. "But at this point, we're highly optimistic."