Is It a Good Idea to Buy Mutual Funds From Banks?

Mutual funds offer consumers a great way to access a professionally managed group of assets at a relatively low cost, with reasonable annual expenses. Mutual funds can be purchased in any investment account, such as an IRA, which can be opened with many different financial institutions, including banks.


Banks don't generally specialize in investing since they are more about savings, day-to-day financial transactions, and loans. That means that a bank might have a more limited pool of mutual fund families—multiple funds managed by the same company—for their customers to choose from.

Very often, an investment advisor at a bank gets paid for every customer put into one of the bank’s mutual funds. The advisor is a salesperson earning a commission. While such a person may give you sound advice, you should know that you are not being given all the options you would have by researching mutual funds yourself.

Not every mutual fund is the same as another. This makes it important to have a wide variety of funds to choose from, which could be an issue depending on your bank. For example, mutual funds can be tailored to many different priorities and investment styles: Some are "green," meaning that the underlying investments are ecologically friendly companies and inventions, some have no fees, and so on.


On the other hand, a bank may have lower account balance requirements than a brokerage firm, making investing a real possibility for more individuals. If a bank mutual fund has a $1,000 minimum requirement, ask if you can have that requirement waived in light of your ongoing relationship with the bank and other deposits.

In some instances, a brokerage firm may have a satellite branch in a bank, allowing customers a full range of mutual-fund families and other investments within their closest branch. In such a case, the brokerage firm is likely to offer more than just the bank’s mutual funds.

Also, when you have a mutual fund with your bank, you can check on your balances and holdings as you do your banking. You will also get your statements regarding the mutual fund when you get your bank statement. Some banks combine the information into one statement.

The Bottom Line

Don’t confuse convenience with wise investing. Though it may be easy to buy mutual funds through your bank, you owe it to yourself to understand the funds, including their holdings and their risks.

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