Some industry pundits maintain that a mutual fund complex should either amass assets of $30 billion to $50 billion or get out of the business. But Marshall & Isley Corp. is betting that good performance can be the road to profitability.
The $3.2 billion Marshall Funds boast some of the highest ratings bestowed on retail mutual funds. One of the 11 funds received five stars from Morningstar, the fund rating agency, and three others have four-star ratings for three-year performance.
In an recent interview with American Banker, managing director David W. Schulz talked about the no-load funds and how the bank plans to market them.
How do you plan to expand distribution of the funds?
SCHULZ: Right now, the funds are mostly sold through our trust department and through the bank, through our call center, and with wholesale distribution to planners, other banks, and our 401(k) program.
We plan to add broader distribution in September, including financial planners and other banks and trust companies. Two years ago, we created a turnkey asset-allocation program for smaller community banks using our funds.
Why did you decide to drop the up-front sales fee, or load, on the funds?
SCHULZ: We started with a load for the trust area and our broker-dealer. That lasted six months. We recognized that selling the funds that way would be difficult because of our size. The broader industry is moving no-load. Our funds are sold on the no-load fund supermarkets at Jack White, Fidelity, and now on Schwab.
We're also looking at (selling the funds as) annuities and through other broker-dealers and wirehouses. We have four wholesalers and are looking to add more.
Since your bank parent, Marshall & Isley, does not have a nationally recognized name, how do you tell potential investors who you are?
SCHULZ: We advertise in the Wall Street Journal, Money magazine, and Forbes. But we needed the numbers to support our story before we could go out and tell it.
How do you prepare investors for a possible stock market correction?
SCHULZ: We walk them through the possible risks, but tell them what normal expectations are. The message is: You're here for a reason, and here is what you possibly face.
We send out a quarterly magazine to mutual fund and trust customers, with education and opinions on the market. We also make education models available to trust customers and are pushing them out to retail customers now.
It's a good business thing to do for long-term relationships, which are more important than getting new people through the door.
Our funds follow the investing guidelines, so there are no surprises. That makes you look good to customers.