Will hiring a former banker bring mutual fund firm Alliance Capital Management back to a leading position in banks?
Michael Laughlin, chairman of New York-based Alliance's distribution arm, thinks so.
That's why late last month he hired Richard A. Davies, who until recently was president of the brokerage unit at First Chicago Corp., the country's 10th-largest banking company. He will be a senior vice president and managing director of Alliance's bank division.
"Only someone who understands a bank's culture and has their instincts will be able to adapt and forge new types of relationships with banks," Mr. Laughlin said.
But others disagree. Some say the key to boosting a mutual fund company's presence at banks is motivating a sales force. And banks aren'tknown for having a sales culture, so why would bankers be good at selling mutual funds? they ask.
Still, Mr. Laughlin is hoping Mr. Davies can leverage his six years at First Chicago to help the fund company develop broader relationships with large banks - relationships that go beyond getting shelf space for the company's portfolios.
He insists that hiring a sales executive with a strong banking background has become critical.
Bank brokerages want asset allocation services, and training for their brokers. They want fund companies to give seminars about global investing and aggressive growth funds.
The days are long gone when banks merely sold fixed-income funds as alternatives to certificates of deposits. That was more than a year ago, when fund companies with the best pitch and the largest or most aggressive sales force won the day at banks.
Paul Hondros, president of Fidelity Investments Institutional Services Co., agrees that mutual fund companies will only survive if they meet the complicated needs of banks.
"The old mutual fund world, which can be described as 'Here's a product, lets slam it down their throat,' is gone," he said.
Fund companies are trying to broaden their relationships with banks because their sales in that distribution channel have been slow to recover since last year's bond fund debacle.
Two years ago, Alliance was a leading seller of funds to banks with that distribution channel contributing as much as 23% of the company's total sales.
Now sales at banks make up 10% of sales. Mr. Laughlin's goal is to get banks to generate 15% of total sales by the end of next year.
Mr. Laughlin said banks so far are responding well to Mr. Davies' presence.
"Since Dick joined us, I've had several calls form banks, some not even customers of Alliance, who said the statement we're making is the right one," Mr. Laughlin said.
Fidelity Investments is stocking its sales force with former bankers. It recently hired Richard Tinervin, who used to head the trust department at Charlotte, N.C.-based NationsBank Corp.
Mr. Tinervin is overseeing the sales of the Boston-based company's portfolios to trust departments. "We felt it was important to have someone who new the trust business, and his contacts were important to us," Mr. Hondros said.
"At the end of the day you're only as good as your service is," he said.