MARCO ISLAND, Fla. - Banks should stick with mutual fund sales, but not for the commonly cited reason of boosting fee income, fund guru A. Michael Lipper told an industry conference this week.
Instead, Mr. Lipper said, banks should absorb the sales culture of the fund industry and apply the techniques across product lines.
"I don't believe that making money is the primary reason to be in the fund business," Mr. Lipper told a mutual fund conference sponsored by the American Banker. The president of Lipper Analytical Services, a research firm in Summit, N.J., described his view as "contrarian."
Mr. Lipper said banks had much to gain if they integrated brokers' practices - such as mass mailings, seminars, cold calls, and regular follow-ups - into their routines.
If banks can successfully apply these techniques to other parts of their retail operations, "whatever they make or lose on their mutual fund effort will be very worthwhile to their bottom line," he said.
Right now, he said, banks could get a significant edge on the competition by taking a sales approach to certificates of deposit, especially with the market for mutual funds continuing to sag.
This year will be the "acid test of whether banks with strong fund programs can increase their market share of CDs," Mr. Lipper said.
Mr. Lipper also said banks had room to sharpen the way they market their own funds. Banks should look to their employees and directors as potential fund purchasers, he said. He estimated the number of investors from this group is "south of 10%."
Mr. Lipper's comments rang true to a number of bankers at the conference.
Debra McGinty-Poteet, senior vice president overseeing mutual fund distribution at BankAmerica, eyes the banking company's 95,000 employees as "a heck of a customer base."
But right now, just 3,000 of the San Francisco banking company's staff are purchasers of the Pacific Horizon funds.
The dearth of inside support is dismaying, she said. "If you don't buy it yourself, how can you be really sure it's a good product" for customers, she said.