First Interstate Bancorp has signed up with Standard & Poor's Corp. for help in selling a new retirement savings service.
Dubbed Choice Master, the new service is a full 401(k) plan - including back-office administration and investments - that companies can make available as a benefit to their employees.
Los Angeles-based First Interstate isn't new to selling 401(k) services. But the new Choice Master service, which became available this month, is much more robust than the 401(k) services that the $53.5 billion-asset banking company previously sold.
For instance, the new Choice Master service allows companies to pick mutual funds from as many as 14 families as investment options for their employees. The fund families available include First Interstate's West Core Funds and Pacifica Funds as well as the Dreyfus, Fidelity, and Invesco families.
Previously, First Interstate's 401(k) services offered only the company's own mutual funds as investments.
S&P's role in Choice Master is to help companies choose the mutual funds they will include in their 401(k) plans.
"This is a chance for us to leapfrog into the retirement business," said Allen D. Brown, a First Interstate executive vice president in Houston responsible for marketing Choice Master.
"We had a number of plans before that were competitive but not cutting edge."
S&P will be helping First Interstate's clients by compiling a list of the five best-performing mutual funds in each of the 12 investment categories from among the 200 funds available through Choice Master. The funds are rated on five-year performance.
Under such programs, S&P also helps employers put together "baskets" of mutual funds to include in their plans.
This role is said to be vital, given that corporate sponsors of Choice Master retirement plans have so many funds from which to choose.
"People were coming up to the banks and saying, 'We love your choice of funds, but I don't know what to pick,"' said Harold Westervelt, a regional manager for S&P in San Francisco.
"We step in to make sense of it all," he added.
First Interstate isn't the only bank getting S&P's help with a 401(k) service. First Fidelity Bancorp, in Lawrenceville, N.J., also recently tapped S&P to help its clients choose mutual funds for the bank's 401(k) service.
In so doing, both banking companies are hoping to pick up a bigger share of a booming market.
Assets in 401(k) accounts totalled $490 billion in 1993 and should reach $1 trillion by 1999, according to Access Research, Windsor, Conn. Much of the growth is expected to come from small and midsize companies with as many as 1,000 employees - the target market for Choice Master.
According to Access, banks hold only about 27% of 401(k) assets. But their share is expected to grow rapidly as more banks market the plans harder.
Mr. Brown acknowledged that competition among sellers of 401(k) services is fierce. Banks, in particular, face tough competition from mutual fund and insurance companies, which handle most of the pension and 401(k) market. Mr. Brown said he hopes that teaming up with S&P will give the First Interstate an edge.
