When W. Robert Alexander and Arthur J. Lucey quit First National Bank of Denver in 1986 to set up a mutual fund distribution company called Alps Securities, the competition scoffed.

To big rivals like Lazard Freres & Co., the mid-level bank executives were just "two guys from Denver operating from the trunk of their car," Mr. Alexander, chairman and president of Alps, recalls with relish.

A Pair of Fund Families

Alps has moved up in the world since those days. Today, it brings in $3 million a year by providing servicing and marketing support to mutual funds managed by banks.

Alps serves only two bank mutual fund families: the Westcore Funds, which have $2 billion in assets and are managed by First National's successor, First Interstate Bank of Denver; and Marine Midland Bank's Mariner Funds, with $1.1 billion in assets.

In fact, the business is so small that Alps doesn't even show up on a ranking of the top 15 distributors of bank-related mutual funds compiled by Lipper Analytical Services Inc. Mr. Alexander says that's exactly in keeping with his strategy.

"We think we're small and creative," Mr. Alexander said in an interview. "We want a limited number of relationships."

One of the company's sales pitches to banks is that it will not work for their rivals.

"If Bank of America called and wanted us to distribute their funds, we'd have to say no," Mr. Alexander said. "We don't distribute two banks in the same territory."

The company also emphasizes that it doesn't act as investment adviser to any of the funds it distributes. That role is left to the banks.

By staying small and operating leanly, Alps has been able to position itself as a low-cost provider of mutual fund distribution services.

Half the Usual Fee.

Alps' client banks pay fees equal to 0.05% to 0.10% of their mutual fund assets to the distribution company; the industry norm, Mr. Alexander said, is 0.20%.

As a distributor, Alps is responsible for organizing, registering, capitalizing, and promoting mutual funds. Its tasks include preparing prospectuses and annual reports, and managing fund accounting and general administration.

The company employs 31 people in Denver and four sales and support representatives in New York.

Cultural Ties

The focus is on distribution and sales support. Alps doesn't sell mutual funds directly to bank customers; instead, it helps the banks train their sales employees, and supports the sales force by keeping them informed about fund performance, new products, and market trends.

Because the firm's founders came from the banking culture, they believe they have an edge in helping bankers sell mutual funds.

"We have a consultative approach to banks," said Mr. Lucey, marketing director at Alps. "Other competitors came from different backgrounds than banking."

In 1981, when they worked for First National Bank of Denver, Mr. Alexander and Mr. Lucey helped launched the Westcore funds, one of the first bank proprietary mutual funds in the nation.

When they left the bank in 1986 to set up Alps, they took the Westcore account with them. They snared Marine Midland's Mariner Funds as a client in 1992.

Back-Office Development

Recently, Alps has been building its back-office capabilities through strategic alignments with other firms.

It works with Boston-based State Street Bank and Trust Co. to provide mutual fund transfer agency and custody services for Alps clients. And it has formed a joint venture with American Data Services, a New York-based company, to establish a Denver office for the provision of fund accounting services.

These days, Alps is emphasizing ways to help its bank clients expand their sales outlets.

Alps recently picked up a contract with Golden Banks of Colorado, a $275 million-asset holding company with five locations in Jefferson County, just west of Denver.

Under the agreement, Golden Banks is offering First Interstate's Westcore family of mutual funds.

Longtime Relationship

The two banks have longstanding connections to one another. Until recently, Golden was part of the First Interstate of Denver franchise. And First Interstate and its predecessor, First National Bank, had been Golden's lead correspondent banks since 1937, said G. Scott Gagon, Golden's chairman.

"We had a good acquaintance with them and the Westcore funds for a number of years," Mr. Gagon said. "We've known the people for a long time and think they have a pretty good product."

Mr. Gagon says his employees "really don't sell" Westcore funds; they just give out literature and refer customers to Alps. The program has been up and running just six weeks, so he says it's too early to tell what the results will be.

Mr. Alexander and Mr. Lucey believe there is room for growth in the industry, noting that bank-advised assets total around $180 billion.

They are also looking to service and distribute so-called affinity funds. These funds are created by major corporations for their employees or a common bond group, such as a religious organization.

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