Five Top Funds: How They Market Themselves
Mutual funds may well be the hottest product to hit the banking industry since individual retirement accounts burst into popularity in the 1970s.
The following articles show how five leading banks and thrifts market their mutual funds. The profiles include:
* Glenfed Inc., which ties its compensation plan to its mutual fund business strategy.
* Provident National Bank, the bank that offered the first-ever institutional money market fund.
* Barnett Banks Inc., which just introduced its retail mutual fund program this month.
* Great Western Bank, master of a regularly high-performing family of funds.
* First of America Corp., which built a successful retail fund program out of its trust department assets.
When it comes to selling mutual funds, there's nothing cagey about the strategy at Glenfed Inc.: the 43 brokers in its broker-dealer subsidiary are straight forwardly told to snatch deposits from other financial institutions.
The strategy is backed by Glenfed's incentive plan. Brokers get minimal salaries and rely mostly on commissions for income. And employees who bring in funds from other financial institutions get higher commissions than those who persuade Glenfed's own customers to transfer funds into a mutual fund.
Since Glenfed brokers have that differential incentive, "it is in their best interest to probe for money elsewhere, to steal it from the other guy," said Robert R. Amdahl, chief operating officer of Glenfed Inc.'s mutual fund subsidiary, Glenfed Brokerage Services.
Nonetheless, Glenfed branch managers get bonuses for channeling business to brokers, and, in fact, half of the mutual fund business comes from in-branch referrals.
Transferring Confidence
That is the best way to gain business, said Mr. Amdahl, nothing that customers' confidence in their bankers is transferred to the brokers. And these referrals do not mean money will simply be siphoned from checking accounts to mutual funds. Customers, who often have their assets distributed among institutions, may transfer savings from another bank to a fund sold by Glenfed, said Mr. Amdahl.
Glenfed also seeks new business through statement stuffers, signs in the bank, and seminars in financial management. Members of the community are lured into bank branches for the seminars through local newspaper advertising for advice on new tax laws, estate planning, or other financial planning topics. "We target a very close niche," said Mr. Amdahl.
Once potential customers come in the door, brokers meet with them one-on-one. And rather than talking about products from the start, brokers discuss the customer's financial needs and then recommend particular funds or other products that meet those needs.
Addressing Needs
The bank has a "needs-based-type selling approach, not a heavy-sales-pressure-type approach. We don't just push a lot of product, which is the Merrill Lynch-type strategy," said Mr. Amdahl. "A lot of Merrill Lynch brokers are egomaniacs. They are taught to be that way. That type won't work in a bank."
When the California thrift began building a sales force eight years ago, it did not try to retrain bank employees. Instead, it sought brokers with at least three years' experience in a non-bank-affiliated brokerage. From that group, it chose those who showed promise of adapting to a more bank-like approach to selling, said Mr. Amdahl.
Glenfed's staffing and incentive plans have well served the mutual fund strategy. Since it started in 1984, Glenfed has sold a total of $750 million in assets.
The company does not sell proprietary funds, opting instead to market fund offered by 10 other companies. It sells only load funds, which charge the investor a commission fee. The thrift does not bother with no-load funds, since brokers would have little motivation to sell them.
Glenfed is now selling funds at the rate of $25 million per month. The company expects to earn $4 million in pretax profit from the business this year. Mutual fund business accounts for 80% of the profits of the broker-dealer subsidiary. The other 20% comes from sales of annuities, unit trusts, equities, and corporate and government bonds.
PHOTO : ROBERT R. AMDAHL says, "We don't just push a lot of product."
