Nod from Citicorp's brokerage chief can mean big sales edge for funds.

Arnold E. Amstutz holds the power to make dreams come true for mutual fund companies.

As chairman and chief executive of Citicorp Investment Services, Mr. Amstutz calls the shots on which fund companies get to pitch their wares to the vast clientele of the nation's largest bank.

Winning his nod can mean big bucks. The Citicorp unit is one of the banking industry's top-producing brokerages, with about $2 billion in fund sales last year, according to Strategic Insight, a New York firm that tracks the fund industry.

"Citi is one of the most aggressive banks in targeting customer portfolios," said Les Dinkin of NBW Consulting Group, Westport, Conn. And that, he said, "generates business for the funds."

What's more, New York-based Citicorp is one of the few major banks that puts its firepower behind selling the investment products of unaffiliated companies, rather than emphasizing its proprietary mutual funds. In fact, the Landmark funds, with $3.4 billion in assets, rank only 26th among bank-managed fund families, according to Lipper Analyticat Services, Summit, N.J.

For all the advantages for fund companies, however, making the cut at Citicorp Investment Services is notoriously difficult. Fund companies must run the gauntlet of a quarterly review that sorts mutual funds into "buy," "sell," and "hold" categories.

Using an elaborate matrix, Citicorp executives evaluate the performance, asset size, and longevity of 650 funds. Only about 100 of them win the coveted "buy" rating.

Mr. Amstutz defends the product-selection process as compliance-smart and good for customers, since it focuses on portfolios as a whole, rather than individual products.

"We're exceedingly focused on the client," he said during an interview in his Long Island City, N.Y., office. "That is what drives our business."

Indeed, the review is so rigorous that it is seen as something of a stamp of approval in the banking industry, according to Mr. Dinkin.

"The fact that funds passed Citi's muster can help fund companies sell through other banks," he said.

But fund company executives see matters differently.

Privately they complain that the process is so grueling, frustrating, and downright inscrutable that it almost isn't worth the effort.

And they say the product shifts are confusing to customers, who may buy into a fund only to be cautioned against investing in it later.

Citicorp generally sells any fund requested, but customers are required to sign a form acknowledging that the sale was "unsolicited" and not recommended by the sales representative. Fund company executives say that can befuddle or even scare off customers.

There are signs that Mr. Amstutz, who joined Citicorp Investment Services in January, is heeding the criticism.

Several mutual fund industry executives, who did not want their names used, said Citicorp has begun looking at forming closer ties to some of the fund companies it does business with.

Mr. Amstutz declined to comment on the matter. But the sources speculated that Citicorp has realized it could get more sales support from its mutual fund vendors by switching to the more conventional approach of creating a "short list" of preferred products.

"With 57 wholesalers banging on their door, they weren't able to leverage their relationships," said Lisa Jones, vice president of financial institutions sales and marketing at Massachusetts Financial Services, a Boston-based fund company.

Mutual fund companies that currently sell a lot of products through Citicorp Investment Services would stand the best chance of landing on the list, which could be whittled to as few as five names, the sources added.

Strong contenders are believed to include Massachusetts Financial, Putnam Investments, Fidelity Investments, Dreyfus Corp., and AIM Management. Group.

Even if Citicorp Investment Services does team up with fewer partners, however, Mr. Amstutz seems likely to stick with most of the brokerage's strategies.

For instance, Mr. Amstutz, who was previously president of the Advest Group, a major brokerage firm in Hartford, Conn., is a big fan of the asset-allocation approach to investing.

Citicorp Investment Services, he notes, was one of the first bank-affiliated brokerages to use detailed questionnaires to build customer-risk profiles that form the basis for investment recommendations.

This approach has "saved us from some of the mischief others have encountered," Mr. Amstutz said, referring to the lawsuits that some disgruntled customers have filed against banks.

As he heads into 1995, Mr. Amstutz is beginning to set some priorities for the new year.

Near the top of the list is Citicorp's plan to launch a proprietary family of variable annuities.

Such investments give mutual fund investors a way of sheltering long-term savings from taxation. Citicorp's annuities would offer the option of investing in its Landmark funds, as well as funds managed by Fidelity, Massachusetts Financial, and AIM.

The company is also introducing a wrap fee product and is upgrading its investment technology.

And like many bank brokerage firms, Citicorp Investment Services is grappling with how to keep sales momentum alive amid rising regulatory scrutiny and a rough market.

To that end, Mr. Amstutz is pouring money into training. "The largest single item in my budget for next year is sales training," he said.

The training will focus on compliance, making sure investment consultants know what products are important to which customers, and teaching them to identify clients' needs, Mr. Amstutz said.

"I think the bottom line is, if we can be sensitive to our customers' needs and combine that with the tremendous technological leverage we have, we have a real advantage," he said.

Citicorp Investment Services

At a Glance

Chairman and CEO

Arnold E. Amstutz

Product line:

650 mutual funds, plus a range of stocks, bonds, and insurance products

1994 sales:

$2 billion

Sales representatives:

400

Sales outlets:

450

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