Magazine article American Banker

Banks Shine as Fund Customers Consult the Stars

Magazine article American Banker

Banks Shine as Fund Customers Consult the Stars

Article excerpt

Morningstar's mutual fund rating system is proving a boon to bank investment sales programs, according to a prominent bank mutual fund executive.

"Banks were not seen as places for investment advice," said Lawrence S. Kash, a vice chairman and director of Mellon Bank Corp.'s Dreyfus Corp. unit.

"Now people are going there (to banks) because Morningstar's outside endorsement gives them credibility."

Morningstar's "star" ratings system offers investors-who have grown increasingly wary of the advice they get at banks and other advisers-an easy way to understand mutual funds, Mr. Kash said. The Chicago-based company, which assigns stars to individual portfolios based on their past performance, has a stellar reputation as an objective source of investor information, he said.

"Morningstar changed consumer behavior," Mr. Kash said.

The head of distribution for the $79 billion Dreyfus funds, Mr. Kash urged bankers to advertise in their branches the highest-rated funds they sell.

This type of "billboarding" is responsible for between 15% and 20% of Dreyfus' sales, Mr. Kash said.

Mr. Kash's comments came during a panel discussion Friday at the Investment Company Institute's annual conference here.

Many banks with highly rated proprietary funds do try to attract assets by touting their stars. When Union Bank of California wanted to start selling its funds outside of its traditional market, it advertised its four-star- rated value momentum fund. …

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