Mellon Package Would Combine Investment and Bank Accounts

Two years after completing its ground-breaking acquisition of Dreyfus Corp., Mellon Bank Corp. is taking a giant step toward integrating its product line with that of its mutual fund subsidiary.

This fall, Mellon plans to unveil the Lion Account, a consolidated financial services package that mixes such traditional banking offerings as checking privileges and loans with cutting-edge investment services, several industry sources said.

As part of the plan, the Pittsburgh-based banking company also intends to launch a no-transaction-fee mutual fund mart, modeled on the highly successful OneSource program operated by Charles Schwab & Co. Mellon would be the first bank to join the handful of mutual fund and brokerage firms to offer the service, which is essentially a brokerage outlet for no-load mutual funds.

The Lion Account - named for the roaring beast that has served as Dreyfus' signature for decades - is seen as a marketing breakthrough for Mellon and the fund unit.

"They have been trying to put this together since the day they merged" in August 1994, said a marketing consultant, who did not want to be mentioned by name.

Indeed, when Mellon announced plans in December 1993 to buy the nation's sixth-largest mutual fund company, it cited tremendous potential to capture customers and revenues by creating a financial services supermarket. But instead, the banking company found itself struggling to revitalize a fatigued fund company, whose concentration in fixed-income investments made it ill-prepared to compete for long-term assets.

Sources with detailed knowledge of Mellon's plans said the Lion Account was conceived of as a "platform" for bundling an array of services that fall under the broad banner of financial planning.

For instance, customers of both Mellon and Dreyfus would be able to create a single account that served as an umbrella for such services as checking accounts, insurance, credit cards, certificates of deposit, and mutual funds. Some sources also named home equity loans and car loans as part of the package.

Customers would be able to track their investments, savings, and loans on a single, consolidated account statement, sources said.

The effort is being spearheaded by William Glavin, an executive vice president and director of product management at New York-based Dreyfus. Mr. Glavin, reached late Tuesday at the Investment Company Institute's annual convention in Washington, declined to comment, as did a Dreyfus spokeswoman.

The plan to create a consolidated financial services account places Mellon in the vanguard of banks seeking to transform themselves into financial supermarkets, said Neil Bathon, president of Financial Research Corp., a Chicago-based mutual fund tracking and consulting firm.

"If banks don't adapt a new mindset - bring everything together - they won't be successful," Mr. Bathon said. He added that several other banks - among them NationsBank Corp., Citicorp, and Chase Manhattan Corp. - are eyeing similar initiatives.

The Lion Account has been in development for about 90 days, said a communications consultant, who also requested anonymity. This source said the account would "encompass a lot of areas of financial planning," including saving for retirement and college and reducing taxes.

If the Lion Account catches on with investors, it could help erase lingering doubts about the wisdom of Mellon's $1.85 billion acquisition of Dreyfus, according to the marketing consultant.

The deal, greeted upon its announcement as a master stroke by Mellon Chairman Frank Cahouet, came under criticism when, within months of the merger, Dreyfus' asset base began to shrink.

Mellon responded by directing Dreyfus to diversify its product line, and equity mutual funds now make up 17% of the company's assets, up from 14% at yearend 1994.

A package as comprehensive as the planned Lion Account is long overdue, observers said. Mellon and Dreyfus are said to have had difficulty getting mutual fund and banking executives to work closely together. The partners also faced a host of operational obstacles, as the Lion account requires that banking, insurance, and investment systems work together to build a truly comprehensive picture of the customer.

But now, the Lion Account is winning rave reviews.

"Is it innovative to commercial banking? Absolutely," said James Wells, a managing director of Furash & Co., Washington. "Mellon's got a great name. Dreyfus has got a great name. They just haven't been able to put it together, and it looks like they are now."

By including insurance and investment offerings in the package, Mellon and Dreyfus appear to have come up with a prototype of "the next generation of asset-management relationship accounts," said Les Dinkin, managing principal of NBW Consulting Group, Westport, Conn.

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