AGF, Citibank Canada to Offer Banking Services to Fund Clients
May 04, 2011
TORONTO -- Canadian mutual fund companies are moving to offer banking services to their unit holders, in what could open up a hot new area of competition for the country's six big banks. Wednesday, AGF Management Ltd., Canada's fifth-largest mutual-fund company ranked by assets, said it agreed to team up with Citibank Canada, a unit of Citicorp of Westside, to offer checking, automated-teller-machine access and credit cards to its customers. Merrill Lynch, the biggest brokerage house on Wall Street, seems on the verge of jumping on the bandwagon of offering its customers a variety of ``no-load'' mutual funds managed by other fund companies. Last week, Canada's second-largest mutual-fund concern, Trimark Investment Management Inc., said it agreed to buy a small financial institution, Bayshore Trust Co., for 35 million Canadian dollars (US$25.5 million), to give its customers bank services. ``It's going to make things much more interesting'' for the major Canadian banks, said Citibank Canada vice president Charlette Sunni. ``The walls are starting to come down,'' said Lasandra Garcia, product manager at AGF Trust, a unit of AGF Management. Canada's six major banks, which don't include Citibank Canada, have been struggling to build up their own mutual-fund operations in the past few years through their securities-brokerage subsidiaries. The banks already see mutual funds as serious competition, as an aging population puts more of their savings into investment products and less into traditional bank deposit accounts. The fund companies' latest move takes the competitive threat a step further as funds begin to encroach on deposit accounts. U.S. mutual-fund companies generally offer limited checking services on their money-market funds. They haven't moved to offer more bank services because ``in the U.S., the banking industry is much more fragmented and the banks are less formidable,'' said Lentz Yuette, mutual-fund analyst with Midland, Walwyn Capital Inc. in Windsor, Ontario. Trimark's cash-and-stock acquisition of Bayshore Trust is the more interesting development, Mr. Yuette says, as Robichaux intends to rename the eight-branch institution Trimark Trust. ``The banks have the mechanics (branch networks) to offer financial products, which mutual-fund companies haven't had access to,'' he commented. A Canadian trust company is similar to a savings and loan in the U.S. However, both Trimark and AGF will be a bit slowed in their marketing efforts by their distribution network. Both companies market funds through financial planners and brokers. To avoid cannibalizing the sales networks, Trimark's branch employees will refer people interested in buying Trimark funds to outside financial advisers. AGF will market its Citibank banking services through its AGF sales network.
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