Commerce Bancshares launched an asset allocation account this week that gives retail investors services previously reserved for the well-to-do.

St. Louis-based Commerce is assigning relationship managers to clients who open its balanced investment account, which has a $25,000 minimum. Relationship managers are typically associated with private banking units, which require much higher minimum balances.

The new account, Dubbed Portfolio Manager, invests assets in nine proprietary Commerce Funds, which make up approximately 15% of the $7 billion of assets under management at Commerce.

Portfolio Manager is unusual in that its 1% annual fee is capped at $1,000 for clients with more than $100,000 invested. There is no limit on the amount clients can invest.

"This being a competitive market environment, we are conscious of not passing costs onto our clients," said Peter F. Mackie, executive vice president of Commerce Bank.

Instead of capping fees at a dollar amount, most asset allocation accounts determine how many basis points are charged against how much is invested. The latter is considered more profitable.

"If someone is going to charge a minimal fee for this service, it's going to be very hard to make money," said Kenneth R. Hoffman, president of Optima Group, a Fairfield, Conn., investment management consulting firm.

Mr. Hoffman estimates that the marketing cost of acquiring asset allocation accounts ranges from $300 to $1,000 per customer. He said asset allocation accounts usually charge 100 basis points up to $100,000 invested, but then drop to 75 basis points between $100,000 and $500,000, and to as low as 50 basis points between $500,000 and $1 million.

"Banks are often shooting themselves in the foot" by offering cheaper fees, Mr. Hoffman added, because "price will not drive people to purchase the product. Customers are actually more interested in product attributes, service, and performance."

But, Mr. Mackie said, Commerce can afford to charge less than the going price. "We tend not to be driven so much by short-term profit, but by having a well-priced competitive product," he said.

Asset allocation accounts are popular with investment managers who are looking to offer a middle ground between the services rendered to affluent families by trust departments and those mass-marketed to smaller investors.

"This is the first time we've brought well-diversified money management to that level," Mr. Mackie said. "We've been managing money for high-net- worth individuals and institutions."

Six strategies with different levels of risk are offered in the account. They are: aggressive growth, capital appreciation, growth strategy, growth and income, income with growth, and income.

For instance, the income with growth strategy puts approximately 50% of a client's assets in fixed income, 23% in growth equity, 10% in short-term government bond mutual funds, 9% in mid-cap, and 8% in international equity.

Portfolio Manager is guided by a system that rebalances the accounts once a month so that no asset class exceeds the percentage allowed.

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