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Scotiabank seeks bigger slice of mutual fund pie

New head of wealth management makes improved sales a priority, KEITH DAMSELL writes, and it's already paying off

Bank of Nova Scotia wants a bigger piece of Canada's mutual fund pie.

"We are turning the corner. Improving mutual fund sales is a key priority," Barbara Mason, executive vice-president of wealth management at Canada's third-largest bank, told a Montreal investment conference last week.

Scotiabank wants fund sales from its branches to double this year from a year ago. The bank opened 15 branches last year and another 35 are slated for 2007. A key target is the $50-billion in mutual fund assets held by the bank's clients that are managed by somebody else, she said.

"We have recognized that we have a long way to go but we are very focused on delivering a turnaround performance," Ms. Mason said.

Scotiabank has been an also-ran among the big banks when it comes to mutual funds. As of Feb. 28, the bank oversaw $17-billion in funds, the smallest share of the big five banks and a fraction of the $74.6-billion in fund assets managed by Royal Bank of Canada.

"We have not, I think, delivered . . . the extensive capabilities to move to the next level," Ms. Mason said.

Ms. Mason took over the strategic direction of the bank's fund business following the December departure of Karen Fisher, the president and chief executive officer of Scotia Securities Inc. Ms. Fisher had overseen the bank's mutual fund operations since 2000. Under her tenure, in-house funds generated little excitement and third-party offerings dominated sales.

Building up a seasoned sales and advice team is key to Ms. Mason's growth plans. The bank plans to add 100 investment executives to its team of 900 by the end of this year. The retail sales and service team increased by 700 in 2006 and another 200 will be hired in 2007.

Her efforts are starting to pay off. The bank recorded more than $1-billion in net sales for the four-month period ended Feb. 28 compared with net redemptions during the same period in fiscal 2006. Wealth management revenue is expected to grow 10 per cent this year.

A strategic acquisition in the fund business is high on the priority list but the right deal remains elusive, she said. The bank's criteria is "quite specific," including business synergies and cultural issues.

"The deal that we do here, the large one, is extremely strategic and therefore absolutely has to be the right one. We have looked at a number of sizable opportunities and have chosen not to participate for a variety of reasons," Ms. Mason said.

Chou fund wins award

The fund manager humility award of the year goes to Francis Chou.

Buried on page five of his 2006 annual report, dated March 2, is the note "Please forgive me for this shameful display of self-promotion but Chou Associates Fund won the 2006 U.S. Equity Fund of the Year at the Investment Awards ceremony held on Nov. 30, 2006 in Toronto."

On Dec. 1 last year, the industry's "shameful display of self-promotion" showed no bounds as the newswires were flooded with press releases from a long list of award winners including AGF Management Ltd., Dynamic Mutual Funds and others.

Mixed feelings toward Putnam

The glass is half-empty, half-full for Putnam Investment Trust.

A recent survey of U.S. financial advisers found very mixed attitudes toward Putnam, acquired in February by insurer Great-West Lifeco Inc.

Advisers were asked "Will Putnam Investments' sale to a unit of Power Financial Corp. prompt you to re-evaluate whether to recommend Putnam's mutual funds to clients?"

Thirty per cent of the respondents said yes, they would take another look at Putnam. Just under 20 per cent of the respondents said they were unsure while about half of the advisers said their view of Putnam had not changed at all. Fifty-six financial planners were surveyed by online adviser service Investment News.

The good news is almost one-third of advisers are considering getting back into Putnam. The bad news is about half remain generally negative on the company and its funds.

Great-West is buying the Boston-based money manager with $225-billion (U.S.) in assets and global reach, and betting that Putnam will rebound from poor fund performance and the 2003 market timing scandal. Putnam parent Marsh & McLennan Cos. Inc. put the unit up for sale in September as the insurance brokerage moved to streamline its businesses.

© 2007 The Globe and Mail. All rights reserved.

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