CHATSWORTH, Calif. -- For the mutual funds sales force at Great Western Bank, cold calling has become a way of life.
Though most banks and thrifts shy away from that tactic, Great Western, the nation's second-largest thrift, actively encourages its salespeople to punch up phone numbers of bank customers and others to sell funds.
"It's very unbanklike," said Gareth Plank, a thrift analyst with Mabon Securities, San Francisco. "Banks have always waited for you to stumble in the door and take your money away."
No Trust Money
Great Western, a unit of Great Western Financial Corp., has had little choice but to adopt some aggressive sales practices.
Since 1989, it has been seeking to build a proprietary mutual fund family without the benefit of trust money to seed the funds.
At most banks, converted trust money forms the foundation for mutual fund businesses.
Great Western's sales moxie has more than made up for the lack of a trust department. Assets in the thrift's 14 Sierra Trust Funds had swollen to nearly $3 billion by midyear.
That put Great Western in the top 25 of all banks and thrifts in proprietary mutual funds.
Moreover, the business appears to be a money-maker.
Last year, Great Western's mutual fund revenue hit $70 million, accounting for more than half of total retail fees.
In all, Great Western's approach to mutual funds could well serve as a blueprint for other other thrifts planning to enter the business.
While only handful of thrifts have started mutual fund families, many are thought to be considering the move.
And like Great Western, most won't have the benefit of experience in money management.
Thrifts tend to focus tightly on taking deposits and making home loans.
Without a trust department, Great Western lacked more than seed money for its funds; it also lacked in-house investment expertise.
The thrift's solution has been to run its funds with six outside money managers, including the likes of J.P. Morgan & Co. and Scudder, Stevens & Clark.
"They've been masterful at that," said Kurt Cerulli, principal of Cerulli Associates, a Boston-based consulting firm.
He said that even though so many fund functions are performed by outside managers, the thrift has been able to maintain overall control.
Great Western is hardly bashful about its use of outside managers. "We've been able to put together an all-star team," exults F. Brian Cerini, chairman of the board of Sierra Trust Funds.
It is in sales strategies, however, that Great Western has most distinguished itself.
The thrift has assembled a formidable staff of 375 brokers, many of them veterans of brokerage houses.
It is the fourth-largest brokerage force at any bank or thrift, trailing only the staffs of NationsBank, Bank of America, and Firstar Bank Milwaukee, according to Cerulli Associates.
The brokers average a solid $400,000 in sales each month, targeting outside prospects as well as branch customers.
"We're looking for a broker to essentially capitalize on the franchise that we give them," said John D. Ruocco, senior vice president of sales for Sierra investment Services, the thrift's investment products arm.
Aiming for Meetings
The cold calls are geared toward setting up meetings with the prospects rather than toward actually closing sales.
Though most of the brokers hired by Great Western need little tutoring in the art of cold calling, they do undergo an extensive orientation as to the ways of depository institutions.
For starters, they spend about a month in a branch helping employees with their day-to-day tasks and learning about the bank environment.
Then they take a weeklong training session, followed by a series of tests. Those that pass are given their wings and can hit the phones.
Building a Team
For the majority, there is an apprenticeship period that can extend for up to one year, Mr. Ruocco said.
"We want them to become like team members," he said.
Still, the goal is that they not "assimilate totally into that environment, because of the difference between insured products and noninsured products," Mr. Ruocco said.
What are the results of the call calling?
Only a small fraction of the calls result in appointments, but about 30% of the meetings result in fund sales, Mr. Ruocco said. He said he hopes to increase the percent that invest still further.
Financial Planning Module
One way to do that is by building a better financial planning module. For now brokers fill out plans on paper, but Mr. Ruocco is developing a software-based plan.
Financial planning and diversification of assets are the watchwords for years to come, according to Mr. Cerini and Mr. Ruocco.
To help customers diversify their assets, the thrift developed the Sierra Asset Management account.
The account has 9,000 customers, each of whose assets are in one of five basic investment strategies.
Mr. Cerini said not one customer who's signed onto the account has left it.
He predicts that the asset management account will lead the way in building the fund family's assets to $5 billion within three years and $10 billion within five years.
The brokerage force, however, isn't the only sales channel. In keeping with the thrift's willingness to work with outside partners, sales are also carried out through firms like Raymond James Inc., St. Petersburg, Fla., and Primevest Financial Services Inc.
Also, 207 financial planners have contracted to sell the asset management account.
In hiring managers for the funds, meanwhile, Great Western chooses advisory companies individually to meet each fund objective.
Simply using a company known for equity management wouldn't be wise for the bond funds. because the manager would "have a tendency to look at the world as an equity manager." Mr. Cerini explained.
The subadvisers make between 10 to 50 basis points for their services, depending on the type of fund.
Great Western also leans on the subadvisers for research support in decisions about broad investment strategies.
"Our advantage is that we're able to take a combination of thinking from various partners and pull it together." Mr. Cerini said.
And who said thrifts can only make mortgages?