First Merit Bank brokers are stretched a little thin. Twenty-two serve the 150 branches of the Akron, Ohio-based bank.

"You can do the math, and there's no way we have true penetration of all our branches," said Felice L. Larmer, chairman of the $6 billion-asset bank's brokerage arm.

To build investment product sales without building staff, Ms. Larmer has turned to a start-up organization in Tampa that promised a soft-sell approach to building relationships with ignored customers. Six months later, First Merit has new sales, a bank brokerage staff secure in their jobs, and plans to hand commercial banking contacts to the young firm.

"I have no overhead for this, I have no costs," Ms. Larmer said. On an after-tax basis, she said, the return to the bank is "not that far off from what I'm delivering on my own."

In-branch delivery has its limits and can be expensive, said A. Stewart Rose, founder of KFS Financial LLC, the holding company for Retirement Foundations Agency Inc., which is selling mutual funds, variable and fixed annuities, life and disability insurance, and long-term-care insurance to First Merit customers.

Mr. Rose, who has been a consultant and executive at Fidelity Investments and Citicorp, said he wanted to build a program of consultative professionals focused on helping bank customers plan for retirement and other needs. Baby boomers are "going to be buying billions of dollars of investment products and retirement products," he said. "But they are not buying them at banks."

KFS wants to change that and build relationships with bank customers that have been inactive in bank investment programs.

Ms. Larmer liked what Mr. Rose proposed.

"It has always been my belief that banks do a great job once a client walks into a branch," said Ms. Larmer, who previously worked for KeyCorp. "But how do you reach an invisible customer?"

First Merit tried. Last year it sent out a direct mailing to 10,000 households. The response was abysmal.

Ms. Larmer then handed the list to the brokers who took a stab at it but came up with similar results, she said.

Thus, the brokers put up little protest when she announced she would turn over the list to KFS, she said. It was important that the brokers, the "lifeblood" of the bank's effort, not be undercut. As a precaution, the bank required Retirement Foundations to quickly ask, "Are you currently working with a financial consultant at First Merit?" A "yes" would immediately disqualify the customer from further efforts by KFS, she said.

Mr. Rose's team of eight Series 7-licensed brokers, which spent three months in training before making a live call, successfully worked First Merit's list.

Though the new effort's sales results were not released, Ms. Larmer said First Merit had gross investment product sales of $4.6 million last year and expects $5.5 million in 1998.

Retirement Foundations is to add 20 telephone brokers in the next six weeks and could eventually hire "hundreds" as it seeks to establish relationships with other banks, Mr. Rose said.

Meanwhile, Ms. Larmer said, she is drawing up plans to have Retirement Foundations call on the bank's overlooked commercial customers.

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