First of America Corp., Kalamazoo, Mich., has joined the small but growing cadre of banking companies that sell their mutual funds through outside brokers.
In the summer, First of America tapped a seasoned mutual fund sales specialist to get brokerage firms in four southern states - Georgia, Florida, Arkansas, and Alabama - to sell the bank's Parkstone funds to their clients.
Now this so-called wholesaler is hitting pay dirt. Recently, two brokerage firms, which a senior bank official declined to name, put Parkstone on their lists of preferred funds.
The First of America official, senior vice president R. William Shauman, added that a total of 36 regional brokerage firms, with 13,000 brokers, have agreed to sell the Parkstone funds since the wholesaling effort began.
Mr. Shauman, who handles sales and marketing for First of America's trust and financial services division, said more wholesalers may be added in other areas of the country. One area that will be excluded is the midwestern territory where First of America has most of its 611 branches. This is because the banking company doesn't want outside brokers selling Parkstone funds in competition with its own 112 brokers.
Relatively few of the more than 100 banking companies that operate their own mutual funds get outside brokers to sell their fund complexes to retail investors. Most notable on this list is Chase Manhattan Corp., which gets two-thirds of its sales from external brokers, and Mellon Bank Corp., through its purchase of mutual fund giant Dreyfus Corp.
Many banks see building external sales to retail investors as a long- term goal and a way to boost profits.
But before pushing external sales in direct competition with the giants in the mutual fund business, banks need to build five-year track records - preferably with top-notch returns - and sizable mutual fund complexes, Mr. Shauman said.
First of America is distinguished from most other banking companies with proprietary mutual funds because the $23 billion-asset company has reached these milestones, he added.
"We're no different in our thought process," Mr. Shauman said. "We're just at that point in our evolution."
Indeed, First of America's Parkstone family passed its fifth birthday late in 1993. The family now has 15 portfolios with $4.7 billion of assets, more than two-thirds of which are in long-term stock and bond funds. Furthermore, one portfolio has posted returns that rank it among the best performers in the country.
This fund, the institutional share class of the Parkstone Small Cap portfolio, is ranked as the 43d-best-performing stock fund over the past five years by Lipper Analytical Services Inc.