Banks Putting Fund Salespeople to the Test

Article excerpt

To ensure thier employees are playing by the new rules for mutual fund sales, a handful of banks are sending undercover testers into their own branches.

But the methods that banks use to monitor their investment sales programs can be quite different, as illustrated by two of the first financial institutions to implement such shopping programs: First Interstate Bank, Los Angeles, and American Savings Bank, Irvine, Calif.

First Interstate, which started monitoring its investment products salespeople in 1988, uses a somewhat unusual approach. It has an internal program to test compliance and also contracts for services with Alexander Lucey Inc., a subsidiary of Alps Mutual Funds, the company that distributes the bank's proprietary Westcore Funds.

The company will conduct about 1,000 shops this year for First Interstate, said Arthur Lucey, president of the Denver-based Alexander-Lucey.

Customers Paid and Trained

Bank customers are used as decoys, and are paid between $90 and $200 per shop, depending on how extensive it is.

The customers, who are often recruited by organizations they belong to, such as religious, retirement, and Rotary clubs, can donate their fees to the charity or group of their choice, Mr. Lucey said.

Before being sent out, they are trained on what to look for and what to ask. Areas evaluated include where signs are located, and if sales representatives ask questions, determine suitability, and disclose at least twice that products are not insured by the Federal Deposit Insurance Corp.

"The intent is to give [sales representatives] positive feedback," Mr. Lucey said.

First Interstate's salespeople are also expected to shop competitors.

Compliance and Service

While its approach is different, American Savings Bank has also had a shopping program in place for several years.

ASB Financial Services, a subsidiary of American Savings, began monitoring its investment sales program in 1990 and now uses SG Marketing to test its financial consultants twice a year. …