The best bank for your financial needs - includes an article on private banking

Black Enterprise, July, 1992 by Evette Porter

With private label funds, the bank acts as an adviser and appoints an outside company as sub-adviser. In this case, the bank essentially attaches its name to part of an existing investment fund managed by an outside company.

Because private label funds require large investment dollars to manage (about $25 million in assets), most funds are associated with trust, institutional and retail sales activities. Major banks such as J.P. Morgan & Co. Inc., Bankers Trust Co. and The Chase Manhattan Bank N.A. are among some 200 banks nationwide that offer private label funds.

Discount brokerage services and competitively priced investments are becoming available at more and more banks. Unfortunately, banks are still prohibited from giving their retail customers advice on which securities or mutual funds to buy. The reason has more to do with federal banking restrictions than with the bank's ability to provide financial advice. Several banks already offer such services to their corporate and private banking clients.

For the average customer, banks usually provide either an information desk or a toll-free number to use to trade securities. Because discount brokerage firms are designed for do-it-yourself investors, only a few market-savvy clients--about 20% of all investors--benefit from their services.

By far the most common method used by banks to market securities and mutual funds is via third-party service firms. By using an outside marketing company, a bank can offer brokerage services through a registered sales force within the bank's branch offices. Companies such as Invest Financial Corp. and Wall Street Investor Services are just a few of the firms that operate brokerage sales through commercial banks.

Many banks are taking advantage of new, sophisticated computer systems to offer a myriad of checking accounts. Some accounts include such features as buyer-protection insurance on goods bought with checks, merchandise discounts, travel discounts and even health care benefits.

By offering a variety of checking accounts, SunBank in Orlando, Fla., can target different market niches with its products. SunBank's Portfolio Banking account, for example, requires a $20,000 minimum combined balance. But it comes with no-fee checking, a high-interest "Super Now" account, no-fee gold (Visa or Mastercard) credit card, access to a personal banker and discount brokerage services.

In addition, commercial banks are getting involved in underwriting securities and bonds. Seafirst in Seattle, for example, is able to offer municipal bonds that the firm has underwritten at lower rates than secondary markets (such as retail brokers) can charge.

Right Product, Wrong Bank

There are some drawbacks, critics say, to having banks get involved in providing financial services other than their traditional business. For instance, investment companies specializing in mutual funds can offer a greater number of funds, thereby allowing customers to match their investment strategies with appropriate funds.