Wheat First Union, a brokerage subsidiary of First Union Corp., has outsourced its mutual fund wrap account clearing capabilities to San Francisco-based Charles Schwab & Co.

The deal, announced last week, came after the Richmond, Va., unit's announcement last month that it would eliminate 25 back-office jobs in that area. The people involved are being reassigned, a Wheat First spokeswoman said.

Beginning in April Schwab will do back-office clearing for Wheat First's no-load fund mart FundSource, which contains 1,000 funds, said David Peck, a vice president at Schwab's mutual fund clearing division.

Wheat First's 1,000 brokers and 58 correspondent brokerage firms will also have access to an additional 1,700 funds drawn from Schwab's popular OneSource no-load mart, as well as from its fee-based Mutual Fund Marketplace, Mr. Peck said.

The deal is Schwab's first with a broker-dealer. Unlike agreements Schwab has with Charlotte, N.C.-based First Union and KeyCorp in Cleveland, it will not tout the OneSource brand name.

Last week's deal is entirely separate from the arrangement Schwab has with Wheat First's parent First Union, said Tom Seip, head of mutual funds at Schwab.

Adding that negotiations with Wheat First were under way before First Union unveiled plans to buy the broker-dealer last August for $491 million, Mr. Seip said the outsourcing deal is "completely different." The acquisition closed this month.

Schwab first hinted in December that it was close to another deal similar to its contracts with First Union and KeyCorp. However, Mr. Seip said, "it was dragged out a little bit because they were focused on" the acquisition "and we had to fine-tune a few things."

Wheat First and First Union Brokerage Services have said they will operate as separate brokerage units.

Mr. Peck said Schwab is working on expanding its deal with KeyCorp to provide mutual fund wrap account processing. First Union already uses Schwab's back-office capabilities, including for about $120 million of wrap assets that were transferred last month in First Union's acquisition of Signet Banking Corp., he said. First Union acquired Signet for $3.25 billion last November.

The move to do mutual fund clearing for outside institutions does not mean a change in focus at Schwab, said Mr. Peck. It will continue to supply processing services, as well as the OneSource brand name to banks and broker-dealers that do not already have their own fund programs, he said.

Schwab is in talks with three other broker-dealers and at least three banking companies for similar deals, he added.

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