Automation Choices Grow for Mutual Funds

By Arend, Mark | ABA Banking Journal, March 1993 | Go to article overview

Automation Choices Grow for Mutual Funds


Arend, Mark, ABA Banking Journal


Any new product initiative as ambitious as a line of mutual funds brings with it weighty operational considerations. Mutual funds require numerous automated systems, from investment planning and selection systems to accounting and recordkeeping systems.

Such developing technologies as knowledge-based systems, imaging, and other workstation applications are gaining momentum in the mutual fund servicing world. Whether they have a role to play in individual banks is a function of what level of involvement a bank has in mutual funds, as well as cost and convenience.

Because significant processing volume is necessary to cost-justify an internal account-recordkeeping unit, few banks establish one. Transfer agents or third-party providers typically provide the accounting and recordkeeping services. This enables the bank to concentrate on sales and marketing.

Front-end systems. Banks that are ready to automate the sales and marketing of mutual funds are turning to desktop systems. For example, marketing personnel and branch platform officers are the intended users of the Financial Asset Builder workstation, a new system from DST Systems, Inc., Kansas City, Mo.

Between eight and nine out of ten bank-originated mutual fund sales are made by branch sales staff, according to DST. Its system helps them explain mutual fund options, project possible earnings, and place orders for mutual fund shares.

Such systems also help banks track where new sales leads are coming from, be it within the branch, brokerage distribution outlets, or elsewhere.

"Mutual fund service providers typically have not had to deal with this in the past," notes Susan West, executive vice-president of Concord Financial Group, Inc., New York, which provides proprietary fund sponsorship, distribution, compliance, and administration services. "As banks become more active in fund distribution, they need to monitor the success of various distribution outlets in turning leads into sales."

Concord helps institutional clients and their customers manage their holdings from a remote location using a workstation running cash management software. Called The Cash Management System, the software automates routine accounting tasks, dividend accrual tracking, account reconciliation, and the generation of customer statements and IRS 1099 statements.

"We've built DDA sweep features into the system," adds West, "where excess cash in DDA accounts over a specified balance is automatically swept into a mutual fund money market account."

A different approach to tracking sales leads is available from CIC/DISC Corp., New York, which was acquired recently by Affiliated Computer Services, an outsourcing company based in Dallas. CIC/DISC, which specializes in corporate reorganization services, markets a mutual fund sales and literature fulfillment system. The system provides sales analysis and reporting, automated literature inventory and tracking, and other functions.

The system is available on a service-bureau basis and interfaces with several transfer agent systems.

Coming: knowledge systems. Bank sellers of mutual funds, annuities, and other nontraditional products are looking forward to the availability of more advanced products based on knowledge-based (or expert) systems. Such products may lend themselves to cross-selling and problem-resolution applications.

When a customer phones the bank (or transfer agent handling customer service) with a mutual-fund question, the customer service representative may be able to access the customer's entire bank relationship file and suggest additional bank products based on the customer's investment profile.

Knowledge-based systems should keep track of the unique processing rules of various funds or shareholder instructions concerning, for instance, the reinvestment of dividend income. Customer-service staff could then spend less time familiarizing themselves with rules and more time answering customers' questions. …

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