Abstract: First there were bank brokerages that let people buy and sell mutual fund shares at the bank branch. Then banks started offering 800 numbers customers could call to handle mutual fund transactions by phone. Now a handful of banks permit certain transactions on certain types of mutual funds to be done at an automated teller machine. A recent study conducted by the Federal Reserve showed that three large banks offer this capability and 16 more plan to do so. The banks were not identified in the study, but Fleet National Bank, Citibank, and Wells Fargo Bank are doing this and BayBanks announced earlier this year that it is looking into it. You may wonder how an ATM can deal with disclosures, suitability issues, and daily fluctuations in net asset value. Fleet and Citibank make the service available only on money market fund accounts that have already been opened. (Citibank does provide basic information on its equity and bond funds as well.) Therefore disclosures and suitability are taken care of by the Series 6 licensed representative at the branch who opens the account and the net asset value is locked in at $1 per share. Dave Nadig, senior consultant at Cerulli Associates, thinks this is a good idea. It's ridiculous not to be able to move money in and out of a money market fund on an ATM, because this is a cash vehicle, he says. It's inevitable and it's common sense. be really competitive as a bank, you need to have access to your money market funds through the ATM, especially in markets like Boston, New York, St. Louis, and San Francisco, says Nadig. Wells Fargo in August began allowing customers to redeem and purchase shares of its Stagecoach equity and bond funds as well as Stagecoach money market mutual funds. Customers cannot open a fund account at an ATM, however, so suitability determination and disclosures are made by the personal financial counselor who opens the account. The bank allows customers to redeem a maximum of 80% of the unrestricted balance on a given business day. If the customer redeems or buys shares before 1:00 p.m. on a weekday, the shares are bought or redeemed at that the share's price at clos- ing of that day. After 1:00, they are redeemed or bought at the next business day's price. When a customer redeems shares, the proceeds are not available for two business days after the transaction. Fleet's experience Fleet equipped its ATMs with the ability to handle transactions for its four Galaxy money market mutual funds two years ago. According to Thomas N. Howe, executive vice-president and managing director Of Fleet Investment Center, Fleet provides ATM access through a zerobased checking account that is linked to one of the funds. Balances are swept either from the money market fund to the checking account or vice versa, depending on the cash flow. Suppose a customer opens a checking account that is linked to the Galaxy tax-exempt money market fund. The customer is given a new ATM card with which he or she can access the fund account. To put money into the fund, the customer can make a deposit into that checking account either through the ATM or by taking it to a teller. At night, any deposits into that checking account get swept into the tax-exempt money market fund. When the customer decides to make a withdrawal, he or she again can either use the ATM or write a check against the checking account. At night, an appropriate number of shares of the fund are sold to cover the withdrawal. Customers are discouraged from depositing and withdrawing from this sweep account with wild abandon. If customers keep a combined balance in this account of $10,000 or more, there are no fees for up to two transactions per month. After that, there is a fee of $1 per transaction. This is not to take the place of a regular checking account, says Howe. It's a place to hold liquid balances. …
Publication Year: 1993
Publication Date: 1993-10-01
Language: en
Type: article
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