As Massachusetts Financial Services gears up to provide mutual fund services to community banks, the centerpiece of its efforts is a whiz-bang software program for tracking investments and policing compliance.
The pledge to develop such an ambitious tracking system helped the Boston-based mutual fund company clinch a three-year contract with the Independent Bankers Association of America.
Some of the other companies that bid on the joint venture "gave us the impression that this was a cookie-cutier business," said Gary Teagno, president of IBAA Community Banking Network, a holding company for the trade group's affiliated services.
Massachusetts Financial was selected for its "customer-first" corporate culture, Mr. Teagno said.
"Our mantra is The success of the program is not how much you sell, but how much you sell right," said Jeremiah M. Potts, senior vice president in charge of sales development at Massachusetts Financial.
And the company illustrated it could deliver a program that met customers' needs. "It's one thing to say that, It's another to come in with a computer program that's been in use for a year" and which is based on needs-based selling, Mr. Potts said.
The system, dubbed Financial Asset Builder, also creates an audit trail, enabling both the bank and IBAA to check that the mutual funds sold are appropriate.
There are two levels of service available through independent Bankers Financial Services.
The basic level, Fund Start, gives community banks the ability to connect their customers with registered representatives with Independent Bankers Financial Services. The customers can ask questions and place orders through the brokers, who are based in Memphis.
Putting Brokers in Banks
In addition to meeting customers' needs, the bank earns fee income on every fund sale and on assets that stay invested.
In the second level, Fund Plus, mutual fund sales reps are based in the bank, said Lisa M. Jones, vice president in charge of financial institutions sales and marketing.
Registered representatives will counsel potential investors, discuss investment products, and place orders.
But before they can execute a trade, brokers must enter customers' financial information into the interactive software program, which evaluates the data and makes investment recommendations based on investment styles, financial needs, and stated goals.
Series of Warnings
The software program also exhibits screens showing disclosure statements and instructing customers to allocate assets to products other than mutual funds.
In fact, the very first screen displays an in-depth compliance statement that should please regulators. The text notes that "shares of mutual funds are subject to risk, including possible loss of principal."
Brokers must go through each compliance warning and disclosure notice before being able to place an order, said Danielle M. Rochefort, a technical sales specialist at Massachusetts Financial.
The program has been designed to meet guidelines issued by federal bank regulatory groups, and the software program can be easily updated to keep up with compliance issues, Mr. Teagno said.
Wide Interest Seen
Although IBAA has not started marketing the program, the 6,000-member trade group has already received inquiries from about 150 banks, Mr. Teagno said.
"It would be nice to get 100 banks up and running during the first year," Ms. Jones said.
While most of the banks that expressed interest are community banks, information was requested by one bank with $1 billion of assets, she said.
Officials at Massachusetts Financial said the project is on schedule. All the marketing material is ready and the broker-dealer is expected to be approved in early February.