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Bank Mutual Fund Sales Down In May From Year Ago

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Bank sales of long-term mutual funds totaled $3.2 billion in May, a 10.3% increase from $2.9 billion in April but down 3% since May 2002, when banks sold $3.3 billion worth of funds, reports a new survey by Kenneth Kehrer Associates, Princeton, N.J.

Banks most recent performance was well above the increase of 3.4% in combined assets reported by the U.S. mutual fund industry as a whole, which grew to $6.7 trillion in May from around $6.5 trillion the month before, according to the Investment Company Institute in Washington.

“Mutual fund sales in banks have steadily increased for five consecutive months,” says Lynn Niedermeier, president of Invest Financial Corporation, Tampa, Fla., the sponsor of the Kehrer survey.

Fund sales in banks are up 68% since December, Niedermeier notes.

ICI data shows overall fund assets up by a similar percentage over that period.

Last year, bank mutual fund sales were up 8% over 2001, while ICI numbers show they were up only 4%. In the first quarter of 2003, bank sales were up 6% from the previous quarter, while ICI reported total long-term fund sales down 1.2% in that time, Kenneth Kehrer, head of the research firm, points out.

Kehrer notes, however, that ICI and bank data are not strictly comparable since ICI includes a high percentage of institutional buyers, such as pension plans, in its figures.

Bank sales of funds, on the other hand, are almost all to individual investors.

Neidermeier believes investors are increasingly confident in the recommendations of bank financial advisors.

Kehrer adds that banks have seen strong inflows of money-market deposits in the past couple of years as investors sought safety after the beating they took in equities.

“Now that the equity markets have been improving, it appears that many bank customers are disillusioned with wire house brokers and self-directed investing, and are turning to the financial advisers where they do their banking,” Kehrer argues.

Based on their recent sales growth, banks are gaining market share in mutual funds, Kehrer believes.

Fund sales in banks in May were at their highest level in a year, Kehrers data shows.

Most of the increases came from existing banks rather than the addition of new banks to mutual fund sales, he adds.

The survey monitors long-term mutual fund sales from a national sample of more than 600 banks, savings and loans, and credit unions. Altogether, Kehrer says, the sample accounts for more than 40% of all bank retail mutual fund sales and two-thirds of all bank investment sales.

Reproduced from National Underwriter Life & Health/Financial Services Edition, July 21, 2003. Copyright 2003 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.