Although Massachusetts Financial Services officials are forecasting slow growth for the U.S. economy in 1994, they are predicting a boom in sales of their funds through banks.
The bank channel currently accounts for about 15% to 20% of the Boston-based mutual funds company's business, A. Keith Brodkin, chairman and chief executive officer, said Tuesday at the company's annual investment outlook in New York.
Over the next few years, he expects about 30% of the company's fund sales will be through banks.
New Distribution Channels
Massachusetts Financial officials welcome the prospect of selling more through banks. "We're always happy with new distribution channels," said Jeffrey L. Shames, president and chief equity officer. Banks are "a big, influential channel," he said.
Massachusetts Financial, the nation's oldest mutual fund organization with $34 billion of assets under management, isn't concerned about banks or brokerage firms eating away at its market share, Mr. Brodkin said.
"We don't see Merrill Lynch as a threat," he said. And as for banks building proprietary funds, that doesn't worry him either.
"There will be a vast number of smaller banks selling our funds," he said.
|Spreading the Word'
With banks breaking into the funds arena, "it means more advertising in the press and mare information," Mr. Shames added. "The banks are helping us spread the word."
The marketing of mutual funds won't just be more of the same, Mr. Brodkin predicted. "I think you're going to see massive amounts of advertising coming out about the role of financial counselors" and the help they can provide, he said.
Stressing the value added by investment counselors is one way to justify fees - or loads - charged" for buying, selling, or owning mutual funds.
Loads Seen Dominant
"The overall outlook is that fees will trim down," Mr. Shames said. However, he added, investors are also more concerned with returns than fees.
For the past decade, 55% of all mutual fund sales have carried loads, Mr. Shames said. For the next five years, he expects loads will continue to dominate the industry.
Customers that either paid a fee to invest or are charged to cash out are less likely to ride out market downturns, Mr. Brodkin said. "I think you find the no-load funds tend to redeem more rapidly."