Stein Roe & Farnham's investment management services are not just for the very wealthy any more.
The Chicago-based firm is offering its investment advisory and research expertise to clients who invest at least $50,000 in its SteinRoe family of no-load mutual funds.
And the company's services could soon be offered through banks, said Porter P. Morgan, investment strategist at Liberty Financial Cos., the parent company of Stein Roe & Farnham.
The new program, dubbed SteinRoe Counselor, "is like an extremely low-cost trust," Mr. Morgan said.
Nationwide Rollout
After successfully testing the program earlier this year, the Counselor service will be rolled out nationwide this month.
Now the company, which manages $4.7 billion in mutual fund assets, is exploring ways of offering the program through banks. Though Mr. Morgan would not disclose the names of potential partners, he said the company is close to striking deals with one or two banks.
"We think we have created something that will be helpful and useful in the banking environment," Mr. Morgan said.
Through the program, banks can offer the SteinRoe Counselor service directly to customers. In the bank version of the program, customers pay about 1% of assets per year for the service. Most of that fee income will flow to the bank, Mr. Morgan said.
Potential clients first answer 20 questions based on their investment goals and personal finances and mail the answers to SteinRoe. After analyzing the questionnaire responses and speaking with potential clients by phone, SteinRoe sends a personal investment profile and specific portfolio recommendations back for free.
If investors decide to use the Counselor service, they sign an agreement and pay an advisory fee based on the percentage of assets invested, Mr. Porter said.
Preferred Customers
For those who invest $100,000, SteinRoe offers the Counselor Preferred program. Preferred customers pay 1% of assets a year for the money management service.
Counselor clients receive ongoing investment advice from a licensed broker who is dedicated to their account.
In addition to answering questions and providing assistance on transactions, advisers contact clients periodically to discuss major market events and review investment objectives. Monthly statements also include portfolio recommendations on specific SteinRoe products and how much to invest in each of them.
Counselor Preferred customers receive the added benefit of having their portfolios actively managed. Based on its economic outlook, SteinRoe will automatically adjust its preferred customers' portfolio mix.
Sales Reps on Salary
Unlike many representatives who sell investment products, SteinRoe advisers are paid salaries instead of commissions. No loads or 12b-1 fees are charged for the service.
Stein Roe & Farnham's clients have historically been wealthy families and major institutions. "We have been searching for a way to bring our 60 years of investment expertise to people who are not yet millionaries," Mr. Morgan said.
Through the Counselor program, clients get "everything the millionaires get, except a free lunch," he said.
Although SteinRoe's fund sister, the Liberty Financial funds, are sold primarily through banks, SteinRoe mutual funds have mostly been sold through newspaper advertisements.
Bringing bank customers into the fold is expected to expand Stein Roe & Farnham's client base, Mr. Morgan said.
Bank size has nothing to do with the appropriateness of offering the program, said William P. Rice. director of corporate communications for the Liberty Financial. It can be used as a supplement to the types of products they offer now, he said.
"We've talked to banks with just five to 10 branches don't have retail trust departments," about the Counselor program, Mr. Morgan said.
Several medium-size banks are also "very interested" in offering the service, he said. And even one big California bank sees it as a good opportunity for its own trust department, he added. The program could help the big bank, which Mr. Morgan would not name, bring in smaller trust or service the reinvestment of disbursed trust, Mr. Morgan explained.
"It also takes banks out of the transaction business," Mr. Morgan said.
The company plans to "make a big deal" about this program and get banks to offer it, Mr. Morgan said. "We think it's the future of the business."
Doubling of Assets Seen
SteinRoe Mutual Funds President Timothy Armour predicted that the Counselor program could double the company's mutual fund assets to $9 billion in the next few years.
"We would be disappointed if we did not pull in another $2 billion in assets by 1996 directly through SteinRoe," Mr. Morgan said. Through the bank channel, he said "that figure could be even larger."
Liberty is not the only company going after advisory business. Dreyfus Corp. and Fidelity Investments both started services earlier this year.
But Fidelity sells only through its branches, and its minimum investment is twice that of SteinRoe, Mr. Morgan said.
