U.S. Bancorp's plan to license more branch employees to sell mutual funds has revived a long-simmering debate about how banks should market investment products.

The Portland, Ore.-based banking company, which also has a brokerage subsidiary, recently licensed 40 branch employees in about 30 branches to sell mutual funds and plans to license an additional 400 branch workers.

Employing branch employees as sales agents instead of relying on better- trained brokers saves on costs, since these workers are already on salary providing other services.

Still, many banks have gone in the other direction and are increasing their use of Series 7 brokers to sell investment products.

Proponents of the trend toward a broker-dominated sales culture argue that branch employees lack the motivation and knowledge to sell these products effectively.

Branch employees, they believe, don't adequately understand the risks associated with investment products, which could in turn create compliance issues for the bank. Critics also say that branch or platform employees lack sufficient training to assess the needs of the investing customer.

"I think platform sales of mutual funds has been a horrible disservice to the investing public as a whole," said Robert Flowers, head of BA Investment Services, BankAmerica Corp.'s investment subsidiary. "You can't take an individual, put that person through two to six weeks of intensive training, and all of a sudden that person is an investment counselor."

Roger Thomas, president of Thomas Marketing, shares this concern. "Is the client best served by someone who's handling investments part time? ... All of a sudden, your branch banker has become an investment expert."

Officials at $21.4 billion-asset U.S. Bancorp is aware of the criticism, but makes no apologies. "We like to buck the trend," said Rick O. Bowman, president of U.S. Bancorp Insurance, a subsidiary of the banking company.

Mr. Bowman said that branch personnel typically handle smaller investments than the banking company's dedicated brokerage staff will. The bank believes that many customers are satisfied using a branch employee to invest a relatively small amount of money in a mutual fund or annuity .

"We can't justify having 400 broker-dealers, and a dedicated sales force can't afford to do small transactions," Mr. Bowman said.

Mr. Bowman says that the bank has gradually been inculcating its branch employees with a sales culture.

Beginning in 1993, the bank began training employees to sell annuities. Now it has 391 employees in branches throughout its system who have insurance licenses allowing them to sell annuities, but not mutual funds.

U.S. Bancorp started out by training employees to sell annuities because they are simpler to sell than mutual funds, and so the bank could "identify people who have the aptitude to sell," said Mr. Bowman.

Employees who do not like selling annuities can drop out of the program. Those who remain may be trained to sell mutual funds.

"We're seeing less and less demand in the branches" for routine banking activity, Mr. Bowman said. "We look at this program as a career path for those employees who want to get into sales as well as banking."

But for now, the industry remains skeptical of this reliance on a branch employee sales force.

"The theory is the more lines you throw in the water, the more likely you are to catch a fish," said John Philip Sousa IV, a bank consultant. "I'm not sure that is the right way to approach this market."

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