BofA Ranks High in Mutual Funds Service : Banking: A survey lists Great Western and Wells Fargo among the worst. They and others at bottom of the standings dispute the results.
A major national survey of the way financial institutions sell mutual funds and other securities gave high marks for disclosure and customer service to Bank of America, while ranking Great Western and Wells Fargo among the worst performers.
The California-based institutions were among 50 major banks and thrifts surveyed by “mystery” shoppers for a market research firm in San Francisco, which asked for advice on how to invest $35,000.
Almost half the time, banking personnel failed to ask the prospective customers about their income or tax brackets--vital information for determining appropriate investments, according to Scott Galloway, head of Prophet Market Research.
Galloway said women were often treated as “inferior prospects”--they found it harder to arrange a meeting with a bank representative and were less likely to be informed that bank securities investments lack the federal insurance protection given to deposits of up to $100,000.
Financial institutions that ranked low in the survey vigorously disputed the findings.
Banks and savings and loans have moved aggressively in recent years into the sale of mutual funds, securities and other uninsured investments. Financial industry deregulation has allowed the depository institutions to expand the range of products, but banking regulators want to ensure that financial institutions fully disclose the risks to customers.
Earlier this year, Prophet Market Research did a study commissioned by Money magazine, which included 100 visits to 33 institutions. But the latest survey, which the market research firm conducted on its own this summer, was a more extensive effort and included 400 visits to branch offices of 50 of the biggest banks.
“We are selling it to whoever will pay for it, from the banks to the American Assn. of Retired Persons to the insurance lobby,” Galloway said. “There is no spin on the data. We try to be brutally honest and non-biased.” The detailed survey is being offered to banks for $15,000.
According to Galloway, the shoppers, who ranged in age from their 30s to their 70s, were specially chosen and trained to “look, smell and feel like the customer base” of the banks.
After visiting the financial institutions, they prepared reports on 48 topics, ranging from the convenience of the proposed appointment to the way in which the investment representative explained bond quality ratings.
The banks were given a grade that could have been as high as 100, based on the weighted series of questions. Scores ranged from 66.9 to 91.4.
Among California institutions, Bank of America was third on the list of 50, with a score of 87.6. The mean industry ranking for the 50 banks was 78.8
Among other California financial institutions, First Nationwide (78.9), Glendale Federal (78.8), American Savings (77.0) and Cal Federal (77.0) were all grouped in the “average” category. First Interstate (74.7) was listed “below average,” and Great Western (70.6) and Wells Fargo (70.2) were in the “worst” category.”
Not surprisingly, the banks’ response to the report usually varied according to where they ranked.
“Obviously, we’re very pleased because it means the things we have been instituting are working and are recognized by the customers,” said Rick Clark, Bank of America’s senior vice president and director of sales and marketing for brokerage activities. The bank emphasizes when training its brokers that they must be “pristine in the approach to disclosure,” he said.
At Great Western Financial, “we strongly disagree with the results of the survey, and we believe we are in full compliance,” said Steve Hawkins, vice president and director of public relations. “The whole issue of compliance is a high priority for us, and our own internal surveys are completely contradictory to the findings of this survey.”
Wells Fargo, which previously had been praised by the Comptroller of the Currency for its disclosure policies, challenged the study.
“We communicate with every one of our customers who purchases a non-traditional product,” said executive vice president Dudley Nigg. “We ask them these kinds of questions. Our results indicate the overwhelming majority are very clear about what they’ve got and very comfortable with what they’ve got.”
Other financial institutions that finished near or at the bottom also disputed the study.
“We believe our sales practices are proper. We fully disclose everything the customer should know,” said Robert Stickler, a spokesman for Florida-based Barnett Banks.
Larry Bayliss, senior vice president at Boatmen’s Bancshares in St. Louis, said: “We put no credence in the study. We feel our program is excellent, and we challenge the survey.”
Officials at First Virginia Bank in suburban Washington and Texas Commerce Bank in Houston also said their banks make vigorous efforts to comply with all disclosure rules, and they disagreed strongly with the Prophet findings. Officials at Chemical Bank in New York could not be reached for comment.
Bank Rankings
Bank of America ranked among the best and Great Western Bank and Wells Fargo ranked among the worst in a survey of the way in which the nation’s financial institutions market their mutual funds to the public. The “mystery shopper” survey, conducted by a market research firm in San Francisco, sought to grade how forthcoming the financial institutions were in disclosing that these investments were not government-insured.
Best
Bank; headquarters Score M & T Trust; Buffalo, N.Y. 91.4 Crestar; Richmond, Va. 88.8 Bank of America; San Francisco 87.6 LaSalle; Chicago 86.8 First Chicago; Chicago 86.0 Midatlantic; Edison, N.J. 85.7 Republic; Owosso, Mich. 85.3
Worst
Bank; headquarters Score Texas Commerce; Houston 71.0 Great Western; Chatsworth 70.6 Wells Fargo; San Francisco 70.2 Barnett Bank; Jacksonville, Fla. 69.4 Chemical Bank; New York 68.5 First Virginia; Falls Church, Va. 67.8 Boatmen’s Bank; St. Louis 66.9
Source: Prophet Market Research
