To sell mutual funds, SunTrust Banks Inc. looks no further than its 27- bank network in the Southeast.
Many bank proprietary families try to reach more prospects through arrangements with regional and national broker-dealers.
But executives at Atlanta-based SunTrust said they are not interested in getting shelf space in mutual fund supermarkets, the brokerages that registered investment advisers use to buy funds for their clients.
"We think it's very hard to get a lot of business off those supermarkets," said Jeff Vogelbacker, first vice president of proprietary investment products at SunTrust. "We concentrate on reaching our own customers through our own marketing channels."
This isolationism has not hurt SunTrust. Retail sales in the STI Classic Fund family, which had $12.2 billion of assets under management at Oct. 31, were up more than 35% compared with the first 10 months of last year.
The 23 portfolios are managed by three advisory units: STI Capital Management, home of Anthony R. Gray, star manager of the capital growth fund; Trusco Capital Management Inc.; and SunTrust Bank, Atlanta.
The newest STI Classic Fund, a small-cap portfolio, was introduced Oct. 7, and a tax-sensitive growth stock fund is planned for a Dec. 15 launching using assets converted from a common trust fund.
Unlike many bank-affiliated fund families that are heavily weighted in money market funds, nearly 70% of the assets in the STI Classic family are in long-term funds, which charge higher fees.
"If you're not doing a lot of non-money-market, you can't make any money," Mr. Vogelbacker said. "Banks are noted for this. We don't have that problem."
The funds are sold through investment management services groups in Florida, Georgia, and Tennessee.
SunTrust operates on a decentralized basis; its banks and other business lines work together regionally.
Without a mother ship shepherding the operation by remote control, accounts are more prosperous, executives said.
"We tend to have closer ties and longer relations with clients. It's clearly a mark of distinction," said T.J. "Ted" Hoepner, chairman and chief executive officer of SunTrust Banks of Florida Inc., Orlando.
SunTrust's Florida operation brings in about half the company's investment sales. Its trust and investment group employs 900 people at 80 sites, including 150 brokers.
The company's brokers have Series 7 licenses. There are no third-party marketers or branch employees, often called "platform workers," with Series 6 licenses who sell a variety of financial services.
To help ensure that sales are in customers' best interests, not just those of brokers, SunTrust has dropped commission differentials.
"We have what's called a level playing field," said Hunting F. Deustch, executive vice president in charge of trust and investments at SunTrust Banks of Florida.
"No matter what the reps sell-third-party funds or our own funds-they get no better compensation."
"Oftentimes third-party funds have aggressive incentives," he added, "and we don't want those incentive arrangements driving behavior."
Though one-fourth of retail customers opt for a front-end load, the rest buy into the "flex" share class, which imposes a 2% charge on net asset value if the customer redeems in less than a year.
Another distinguishing characteristic of SunTrust is that more than half of its mutual fund sales are of proprietary funds. The outside funds sold are primarily from Fidelity Investments, Franklin Templeton Group, and Putnam Investments.
"The proportion of proprietary to nonproprietary sales is unusually high," said Peter Marshall, national director of Ernst & Young's bank mutual fund practice in New York.
"That wouldn't be high by broker-dealer standards, but for a bank that's quite high."