Banking Industry Moves into Investment Services

Article excerpt

By Leonard Sloane N.Y. Times News Service Walk into many banks or savings institutions these days and most likely there will be experts on hand to offer mutual funds, annuities and other investment or insurance products.

The traditional services, including checking and savings accounts and certificates of deposit, are still there, of course, but today about half of the nation's 1,600 savings and loan associations and many banks, both large and small, are also selling an array of securities and the like.

"There's a major movement in the industry now to market a broad range of investment services," said James Shelton, executive director of the Bank Securities Association, a trade organization for banks based in San Francisco. "It is a natural distribution system."

Fred DeBussey, senior vice president of Fitch Investors Service, a major rating agency, said: "People feel comfortable with folks they know and a lot of people feel comfortable dealing with banks. Nationwide, this is a trend that is going to grow all through this decade."

Spurring this growth is the current low interest-rate environment, which has forced six-month bank CD rates down to an average of less than 4 percent. Many individuals who for a long time became accustomed to high CD rates, which as recently as a year ago averaged about 6 percent, are searching for alternative investment possibilities with larger yields; among the choices are common-stock mutual funds and long-term government bonds.

Retail bankers are seeking ways to provide these and other options to keep their customers from taking their certificate of deposit dollars to brokerage or mutual fund concerns, or to insurance companies.

"If they have to go elsewhere to buy an investment option, maybe they will go elsewhere with their other business as well," said Anthony Ronda, a vice president of Apple Bank for Savings in New York. "And then we might lose them as a customer."

Richard Davies, president of First Chicago Investment Corp., a subsidiary of First Chicago Corp., said: "There's nothing we can't offer.

Early in the 80s, investment products were a little sideline. We really view this now as a key strategic product line."

As banks expand the range of their services and move more aggressively into investments, and as regulators continue to interpret the laws separating banking and securities more liberally, consumers are becoming more accustomed to a separate area in their branch devoted solely to these kinds of products.

Some banks have even developed their own group of proprietary funds available only in their branches to sell along with the nationally known funds from groups like Fidelity, Dreyfus and Nuveen.

In buying non-traditional products from banks, cost is rarely a factor. …