Mutual Fund Marketers Take a Leaf from Credit Cards

Article excerpt

Credit card marketing has been one of the banking industry's great success stories in recent years. As banks push into a new type of sales - dealing in mutual funds and other investments - what lessons can they glean from their credit card businesses?

That's the question American Banker put to six executives from banks, a card company, and a consulting firm. They pointed to many parallels between the two businesses - but also noted that selling mutual funds presents some unique challenges.

The credit card business has proved to W. Doug King "that it's possible to sell Wachovia products outside of areas where we have branches."

Mr. King is executive vice president of retail products for Wachovia Corp., a $40 billion-asset banking company in Winston-Salem, N.C., that ranks 17th in credit card outstandings.

Wachovia, which markets its credit cards nationwide, has begun selling shares of its proprietary Biltmore Funds through toll-free telephones lines, as well as through branch-based investment representatives.

"Credit cards are probably more broadly understood than mutual fund products," Mr. King said. "There's the whole matter of suitability and disclosure that makes it much more complex than a credit card solicitation."

Even so, Wachovia has gone ahead with a limited amount of direct mailing, and statement stuffers to credit card holders deemed most likely to want to invest in mutual funds.

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Signet Banking Corp. is borrowing a page from its successful credit card operation as it charges into the mutual fund business.

"The key for us is using the predictive modeling techniques that the credit card unit perfected," said James M. McCoy, vice president and head of product design and distribution for the Richmond, Va., company's brokerage.

Predictive modeling involves soliciting several responses from consumers for a particular product or service and then analyzing those responses. The sales pitch is then changed slightly and the solicitation is repeated until the most efficient pitch is found.

Signet made a name for itself in credit cards through such technology- driven marketing. It spun off its card unit, Capital One Corp., earlier this year.

Signet has been using these techniques in investment services for only a few months, but the response so far has been good, Mr. McCoy said. "Our wrap fund product is striking a chord with people, and it's the one (investment product) that we've most successfully marketed so far."

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If there's one message bank mutual fund executives must learn from the winners of credit card marketing, it's that being a local - or even regional - presence does not spell success.

Bank mutual funds are following credit cards down the road to nationwide distribution, said Anne M. Moore, president of Synergistics, a financial services research and consulting firm in Atlanta.

"The savings and investment area is becoming a national market selling to people" outside an individual bank's branch network, she said.

Ms. Moore urges fund executives to consider direct mail as a sales vehicle for building brand identity and selling funds nationwide. …