Magazine article American Banker

N.Y.'S Arrow Bucks Trend with Fund Plan

Magazine article American Banker

N.Y.'S Arrow Bucks Trend with Fund Plan

Article excerpt

A community bank holding company in upstate New York plans to begin marketing proprietary mutual funds to its retail customers this year even though stocks and mutual funds remain mired in what the company's chief executive called the worst slump in a quarter century.

Thomas L. Hoy said he is convinced that the stock market will rebound and that banks' deposits will decline when it does. Arrow Financial Corp. is preparing for that by offering its own line of investment products, he said.

"If we're not a part of how our customers invest their money, we're not going to make any money ourselves," said Mr. Hoy, who discussed the company's plans last week during a presentation at the Northeast Super-Community Bank Conference in Boston.

Community banks typically will only sell other companies' mutual fund products. But Mr. Hoy said $1.2 billion-asset Arrow could make a lot more charging asset management fees on its own funds than by collecting a commission on others'.

The Glens Falls company's move into mutual fund sales sprang from its trust department. John E. Arsenault, its senior vice president and senior trust adviser, said that for years the company maintained mutual-fund-style vehicles called collective investment trusts to invest the funds of its employee benefits clients.

Arrow registered the trusts as mutual funds in March 2001 after it decided to offer shares to its retail customers, and it has been working since then to assemble a team of licensed salespeople, Mr. Arsenault said. Federal law bars individual investors from participating in collective investment trusts, he said.

Arrow said an investor with $10,000 in the growth fund would pay fees of $123 a year. An investor with $10,000 in the bond fund would pay $129.

In a Jan. 29 filing with the Securities and Exchange Commission, Arrow said that between March 1 and Nov. …

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