Retirement plans seen ripe for banks.

Banks are sitting on a vein of gold and they would do, well to mine it --- before someone else does.

That was the consensus at an American Banker conference on retirement planning services, held in New York this week.

"The assets are enormous and they are there for the taking," said Theodore A. Miller Jr., a principal with Boston-based State Street Global Advisors.

Speaking on a panel on why banks should actively sell defined-contribution plans, Mr. Miller said "that's where the money is -- or is going to be."

Regardless of their size, he said, banks are "going to need to get on that train."

Retirement plans, especially the defined-contribution plans such as 401(k)s, are a booming business.

Assets in 401(k) plans are expected to top $500 billion this year and may grow to more than $600 billion in the next year, according to Kurt Cerulli, principal at Cerulli Associates, Boston.

And the market is expected to continue growing rapidly through the end of the decade, as aging baby boomers begin to plan for their retirement years.

While insurance and mutual fund companies take up more than half of the existing market, banks hold about 32% of retirement assets in this country.

And lheir share is .growing, according to Lincla M. Kerschner, a vice president at First Union National Bank of North Carolina, Charlotte.

Making the transition to selling 401(k)s and other retirement plans is a simple fact of survival, said Mr. Miller, who compared it to banks entering the brokerage business to keep customer dollars from flowing out of their lobbies.

For some banks, selling retirement plans is "a defense mechanism to keep people in your customer base," he said.

"This is a cornerstone.. product for gathering and keeping customers," agreed Robert H. Cooley, executive vice president, Keycorp Management Co.

Part of the attraction for banks to offer defined contribution plans is that they are not niche products but appeal to a broad cross-section of consumers who need to save for retirement, Mr. Cooley said.

Looking to prospective clients takes some careful planning, however.

State Street's Mr. Miller said that most banks would do well to stay away from institutional clients with more than 5,000 plan participants, saying that corporations of that size generally have a retirement plan in place.

Instead, he suggests, banks should focus on midsize or smaller companies.

To keep costs down and to reach as wide audience of customers as possible, Mr. Miller advises banks to construct retirement plans with a variety of investment options and maintain a "cookie-cutter" system in order to manage, package and distribute the product more easily.

"Distribution is key," Mr. Miller said. "You have to ask yourself, how do I get to these people?"

Also, banks shouldn't underestimate their clients, Mr. Miller warned. Business people today have more access to investment information than in days past.

"It can surprise you, how sophisticated these people can be," he said.

And while 401(k) plans are good vehicles to tout a bank's proprietary mutual funds, it may not be enough to satisfy existing customers or draw new ones in, Mr. Miller said. Banks shouldn't be shy in offering better-known mutual funds in their retirement plans.

"You can't be too proud," Mr. Miller said. "If you don't have brand name recognition in your mix of funds, then you're going to want to bring some in."

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