Banks risk serious problems if they don't make compliance a cornerstone of their mutual fund sales efforts, said the head of investment products at Boatmen's National Bank, St. Louis.
Addressing a recent conference in New York, Rainey Gray said compliance must be the responsibility of top fund executives, not just compliance officers. And executives should move quickly to discipline salespeople who slip up.
"If they continue to slide, get rid of them," he said. "I don't care how good they are."
Self-policing programs "can be a pain in the kazoo," he acknowledged. But, he added, "They're really there to keep you out of trouble."
He drove home his point by quoting J.R. Ewing of the long-running television show "Dallas," "Once you've lost your integrity, everything else is easy."
In-house compliance units are supposed to make sure programs adhere to all regulatory and supervisory edicts, as well as corporate policies.
Compliance officers can best do their jobs by being kept up to date, Mr. Gray said. "Don't make them play catch-up, or you'll be in trouble."
In fact, compliance officers should be involved in planning investment product programs, Mr. Gray said at the conference, sponsored by American Banker.
He said customers must acknowledge that their investments are not protected by federal deposit insurance. "You're crazy if you don't make them sign a disclaimer."
Customers go through several states - including curious, confused, and confident - as they progress from mutual fund neophytes to veteran investors, according to market research consultant Marcia Selz.
Banks can boost sales by recognizing this progression and coddling customers every step of the way, said Ms. Selz, head of Los Angeles-based Marketing Matrix. She used pencil drawings of smiling and frowning faces to accompany the "customer attitude" presentation she made at the American Banker mutual fund conference.
"Banks want to be thought of as the first source for mutual funds, just as they are first thought of for loans and checking accounts," Ms. Selz said.
To achieve this, banks must first take care of basics, like letting people know mutual funds are available in branches. That message must be continually reinforced through banners and other signs, Ms. Selz said.
She added that banks must also position themselves as experts in the investment product field to appease customers' concerns about these nontraditional products.