Bankers Trust is turning to teaching in an effort to increase its retirement-services business.
With over 50 years of experience providing services and managing assets for retirement planning, Bankers Trust is no newcomer to the business. The bank, however, is positioning itself to benefit from an expected explosion of assets in the 401(k) market -- from $410 billion now to $1.25 trillion by the year 2000.
A 401(k) is a salary-reduction plan that allows employees to shelter part of their compensation from taxes and save for the future at the same time.
Pilot Program
Illustrating its commitment to this booming market, the New York-based bank will roll out a an ambitious program next year to educate customers about planning for their golden years.
The program, currently in the pilot stage, has been tested by a few of the bank's 401(k) customers including U.S. West.
"We've started a whole new communications program to help people understand about their 401(k) plans," said Rachel Farrell, a vice president in the bank's 401(k) area.
The program, known as the Financial Mentor Education Series, is intended to help people plan more effectively for retirement in an easy and fun to use manner.
Do-It-Yourself Kit
The centerpiece of the series is a do-it-yourself kit. Packaged in speckled black-and-white binder reminiscent of grade school days, the materials are designed to function like homework -- only more enjoyable.
The kit includes worksheets on risk-tolerance and color-coded booklets on what, where, why, and how to plan for retirement. There is a separate package for people who prefer that someone else do the work for them.
"When it comes to 401(k) plans, you basically have a whole cross-section of the American population," Ms. Farrell said. Mentor is designed to serve the whole spectrum, she explained.
And, with more than two million individuals as clients, Bankers Trust provides retirement planning services for a diverse audience.
Part of Strategy
The bank, which manages over #25 billion in defined contribution assets, says its educational program is an integral part of its business building strategy.
The Financial Mentor Education Series "shows we are really committed" to the defined-contribution investment-management market, said Linda McNally, vice president of education for the bank's retirement services division.
The New York-based bank is betting that its commitment will pay off as more and more companies search for retirement services for their employees. At the end of 1992, the industry reported $780 billion in defined-contribution assets and growth is projected at 13% over the next several years.
Ms. McNally said she has already noticed the program's impact. Since it was created last spring, the bank has bid for several contracts with corporations, and "we're always in the finals," she said.
Postiive Feedback
So far, Ms. McNally said, feedback from clients has been very positive.
"We like the program and would like to pilot it," said U.S. West's manager of trust investment, Donald Butt.
Over the next few months, about 200 employees of the communications company will try Mentor. After furnishing them with financial plans based on Bankers Trust's guidance, employees will be asked to fill out questionnaires. Their responses will be used to determine if any adjustments need to be made, Mr. Butt said.
If Mentor works as expected, the Englewood, Colo.-based U.S. West plans to roll it out companywide around January 1.
That will be a major coup for Bankers Trust, since U.S. West has about 65,000 employees. Some 55,000 of participate in 401(k) plans, creating an asset pool of $2.8 billion.
Mentor compares favorably to other programs U.S. West investigated, Mr. Butt said. Before picking Mentor, the company conducted focus groups and the overall reaction to Bankers Trust's program was "extremely positive," he said.
Mr. Butt admits he is biased because U.S. West uses Bankers Trust for other services, but, he says, that's also a plus.
The bank is at an advantage because it serves as record keeper and trustee to 401(k) plans and has access to employees' financial information, he said. "It's a one vendor, one-stop-shopping service."
While probably the largest, U.S. West Isn't the only company to have turned to Bankers Trust for guidance.
Three clients are using the do-it-yourself kit and five clients are rolling out the bank's workshop series this fall, Ms. McNally said. The series comprises employee meetings and workshops addressing plan changes, strategies for investing, and new 401(k) plans.
Distribution Accord
Bankers Trust's first goal is to get its 401(k) customers using the program. Later, the bank may try to distribute it through the Charles Schwab Corp. The bank formed an alliance with Schwab in August to collaborate on 401(k) services.
Distributing the program through Schwab, the giant discount brokerage firm, would provide the bank with a ready-made, nationwide network through Schwab's 186 offices and access to the firm's 2.3 million active customers.
Meanwhile, Ms. McNally said, "We've been approached by many small banks that deal with regional or local markets to be their third party distributors." Several consulting companies have also expressed interest in joint venture efforts, she added.
Customer Requests
Mentor was born out of customer requests. Both corporate plan sponsors and employees "wanted more participation," Ms. McNally said.
At the same time, requests for information were pouring in through the bank's defined contribution service center. "We get phone calls every day from investors asking retirement and financial planning questions," she said.
Before launching its Mentor program, Bankers Trust researched what employees were using and why. Surveys were conducted to determine what information they either needed or wanted to know.
"We looked at what was out there and then wanted to create something different," Ms. McNally said. That lead to the bank's unusual selection of an advertising agency with little experience it the financial industry business.
The New York-based agency, Cabouli, Inc., "was kind of new, but we wanted a fresh approach and they had good ideas," Ms. McNally said.
While others in the defined-contribution investment-management market have developed good marketing materials, the program's packaging and "personalized savings profile make us unique," Ms. McNally maintained.
"We wanted employees to actually use it" and innovative packaging was an integral part in achieving that objective, she said.
Meanwhile, more plans are on the drawing board, said Ms. McNally who is charged with expanding the Financial Mentor Education Series. A personalized database and interactive software are in development now.
The software allows clients to enter their own financial information and see various savings scenarios, instead of using theoretical data. Looking at concrete numbers "encourages people to increase their participation" in planning, Ms. McNally said. And, she added, "that's the idea behind Mentor."
Helpful Hints
Bankers Trust's retirement education program provides: * Do-it-yourself kits to plan for retirement savings * Work sheets to determine risk tolerance * On-site seminars for 401(k) customers * Round-the-clock phone service for customer inquiries
