Plenty of banks sell mutual funds these days. But Union Bank, Los Angeles, has taken the strategy a step further by managing its customers' fund holdings.
For the past year, the Bank of Tokyo affiliate has offered a service that helps customers with $50,000 to $500,000 in investable assets to keep their mutual fund holdings diversified.
The asset accounts have been a smash hit with customers, according to Gregory Knopf, who runs the bank's Union Investors Funds.
The eight Union Investors Funds have assets of $1.4 billion, he said.
Sees New Assets Tripling
Last year, the program attracted $32 million in new assets to the bank's proprietary mutual funds, Mr. Knopf said. This year, he expects to draw 100 million in new fund assets.
"If your bank doesn't offer a product of this kind, you should strongly consider doing so," Mr. Knopf urged bankers attending a conference of the Bank Securities Association in Chicago last week.
Union Bank works with customers to develop an investing profile, it splits its mutual fund clients into five groups, based on their risk tolerance: low volatility, stable income, growth and income, diversified growth, and aggressive growth.
Once the profile is established, the bank takes the investor's assets and allocates them among a selected group of funds that includes four Union Investors funds and two SEI Corp. funds, Mr. Knopf said.
The percentages of different funds in an individual portfolio are changed to meet market conditions and changing customer needs.
Each quarter, the bank sends the customer a statement explaining recent account performance.
For its services, the bank receives a management fee that, together with other costs, comes to less than 2% of assets invested, Mr. Knopf said.
For example, for the first $150,000 under management the bank charges 125 basis points. The fee drops to 110 basis points for the next $ 100,000 and so on.
The average asset account is $185,000, Mr. Knopf said. Customer range in age from 32 to 74.
Mr. Knopf credits the service with helping Union Bank to retain customer relationships and pick up new accounts from competing institutions.
Recently, a customer opened an asset account with a $250,000 check drawn on a competing institution, Mr. Knopf said.
To help generate new business, the bank offers cash referral incentives to retail branch personnel and a 5% commission on the first year's fees for trust referrals.
Shortly, Union Bank will be sending 15,000 private banking customers a direct mailing explaining the account.
Mr. Knopf said that banks should be looking for every way possible, such as asset accounts, to aggressively grow business.
"The easy growth is behind us," he said.