When banks decided to use their established customer base and sell their own mutual funds, they thought it gave them a decided advantage.

So did everyone else, but it hasn't always worked out that way. Banks are turning out to be better at selling funds other than their own.

"Proprietary mutual fund products have not realized their distribution potential," says David Huber, managing director of Winsbury Co.

Based in Columbus, Ohio, Winsbury serves as distributor and administrator to 20 bank-managed mutual fund families, as well as three nonbank investment advisory firms. The funds have more than $22 billion of assets.

Right now Winsbury is privately held, but this week it entered into an agreement to be purchased by Bisys Group Inc. of Little Falls, N.J., for $60 million in cash.

Bisys, which provides data processing, loan and investment services to banks, also recently purchased the Barclay Group, a 401 (k) record-keeping company. Bisys, which went public in 1992, hopes to use Barclay to expand its services to current clients.

Using the Branches

Most of the mutual fund assets administered by Winsbury have come from the institutional and trust side of banks. Now Mr. Huber and his Winsbury colleagues are working to start feeding the bank funds from their own retail people in the branches.

The problem is worse than many might suspect.

"In some cases, 10% of fund sales are proprietary, some 20%. Some are zero," Mr. Huber says. "Of our 20 bank partners, I'd say half of them are not aggressively selling their proprietary products, although I might add that some of that is by design.

"The typical situation is you have close to a $10 billion bank selling a lot of mutual fund products. They have a retail funds effort through third-parties selling $130 million, $140 million in mutual funds per year, none of which are the bank's proprietary funds."

Most proprietary funds started in trust departments for 401(k) or other institutional clients. On a daily basis, the trust department doesn't have much to do with the retail side of the bank, which is more concerned with deposit taking and consumer loans.

Brokers' Complaints

And when the bank's retail stockbrokers are asked why they don't sell the bank's funds, the typical answers are that the trust department runs the funds too conservatively, that commissions aren't as high as those paid by load mutual funds, or that the bank or its adviser doesn't have a track record to sell.

"If you can get people communicating with each other, most of those issues disappear," Mr. Huber says. "We view ourselves as a catalyst in that situation."

The trick is to "build a bridge of trust" between the retail banking people and trust department to let retail people know the skill's exist in trust and to let trust folks know what is needed to sell the funds.

The other key is to get a strong commitment from top management to the proprietary funds sales program. Management has to promote, even order the cooperation, Mr. Huber recommends.

Birmingham-based Amsouth Bank is a good example of what Winsbury is attempting to accomplish.

Amsouth has $11 billion in assets and 197 branches in Alabama, Tennessee, Georgia, and Florida. It started its ASO Outlook Group of funds (recently changed to Amsouth Funds) in 1988 and now serves as adviser for nine funds and two more in registration and a total of $1.4 billion in assets.

Integration Effort

Earlier this year, Amsouth officials decided to sell their funds to the public, instead of just to customers of trust department, such as 401 (k) plans. Though the bank's broker-dealer, Amsouth Investment Services Inc., had been selling other funds for years, it didn't sell the Outlook Funds. It had to integrate the retail and trust sides of the bank.

"That integration is the most difficult transition for banks to make," said George Stevens, the former head of the trust department who moved over to head the broker-dealer six months ago.

"Most banks are coming from the history where they were providers of investment products for the institutional customer. It takes a major commitment on the part of the bank to make itself a major provider of investment service on the retail level." Mr. Stevens says.

Winsbury's Job has chiefly been to recruit and train the brokers and the personal bankers to sell the Outlook Funds. They, don't receive a higher commission to sell Outlook Funds, however. Still, the 190-person sales force has racked up $150 million in sales so far.

Mr. Stevens was among the trust executives who chose Winsbury to distribute the Outlook Funds when they were introduced.

|The Relationship Business'

"We chose Winsbury because we felt they were in the relationship business. When you hook up with Winsbury, there are no conflicts of interest, no hidden agenda. They're not in the fund business," Mr. Stevens explains.

Winsbury assigned Bill Tomko, a marketing management director, to the Amsouth account. He works from Columbus nut spends much of his time in Birmingham.

Mr. Tomko says he is impressed by Amsouth's commitment to market funds on a retail level. "The message is coming from the top down," he said. "A lot of other banks haven't made that management commitment yet."

Mr. Stevens separates distributors into three groups. One is those with a "cookie cutter" approach, where a set number of services are offered in a format. Then there is the mutual fund company that distributes and services bank funds as a sidelight. Finally, he says, there is Winsbury's approach - tailoring a program to fit a bank.

"You get the sense that they are focused on the mutual fund project, its needs, its interests," Mr. Stevens added.

Competition Fierce

Mr. Huber says Winsbury is not the cheapest distributor and administrator. "About average" is the way he describes his company's fees.

Competition is fierce. Winsbury bids against three to five other companies on the average contract.

In selling itself to banks, Winsbury stresses its independence and nonownership of mutual funds. The company has taken the same sales approach for all of its 10 years.

Mr. Huber argues that banks aren't close to tapping their distribution power. Many banks, for example, have 200 branches. They can bring in $5,000 per branch without trying too hard, he argues.

"That's $50 million a year by just doing nothing," Mr. Huber says.

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