When the Investment Company Institute staged its annual convention recently, chairman Matthew P. Fink was introduced to the assembled mutual fund executives as "the consummate worrier."

He doesn't quarrel with the description.

Though the industry is riding high as consumers plow billions of dollars into stock and bond funds, Mr. Fink acknowledges that he can't help thinking about the dark side of all that success.

"I tend to wear it on my sleeve and to vocalize it a lot," he said in a recent interview.

Lately, one of Mr. Fink's biggest worries is that someone in the mutual fund business -- perhaps a bank -- will stumble, tainting the entire industry.

He is also concerned that the industry, in its euphoria, may be overestimating its growth potential. This may be particularly true of banks, he maintains.

|It Isn't a Revolution?

According to the institute's research, he said, the proportion of U.S. households that invest in mutual funds has grown only slightly in the last few years, to 27% from 25%. So the bulk of the new money invested in funds has come from current shareholders, not new ones.

In the case of the banks, Mr. Fink thinks there is a simple explanation for the much-ballyhooed mutual fund explosion.

"I talk to bankers and they tell me that the vast majority of assets are trust or custody funds that they've moved," he said. Actual sales account for a relatively small portion of the growth in bank proprietary funds, he maintained.

"I'm not saying something isn't going on," Mr. Fink said. "But a revolution."

Mr. Fink has developed his cautious stance over 22 years in the mutual fund industry. A graduate of Brown University and Harvard Law School, he joined the Washington-based institute's legal staff in 1971, and was named general counsel in 1977. In 1991, he succeeded David Silver as chairman.

Now 52, he oversees a 130-person organization, spread out over several floors in a terraced building owned by the National Geographic Society.

Mr. Fink's roomy office is stocked with model ships, old photographs, an antique dealer's sign, and other paraphernalia from New Bedford, Mass., where he has summered since boyhood.

In his tenure at the institute, he has witnessed immense change. When he began, mutual fund assets totaled $55 billion. Money market mutual funds and tax-exempt bond funds hadn't even been invented.

Today, industry assets total more than $1.7 trillion, and are on course to pass the $2 trillion mark within a year. In fact, mutual funds could soon hold more consumer savings than commercial banks do.

Mr. Fink sees some of this change in personal terms. Once, in the mid-1980s, he and his wife, Ellanor, threw an impromptu, post-convention bash at their Connecticut Avenue apartment. Fifty mutual fund executives -- fully a third of the convention's attendees -- crowded into the Finks' living room.

"It was everybody in the industry," Mr. Fink recalled. "What would you need now? You'd need the Taj Mahal."

Low interest rates and the entry of banks into the mutual fund area explain only some of the industry's growth, Mr. Fink said.

Equally important, he said, are the rise of 401(k) retirement plans; the decline of direct stock and bond investing; and booming interest in international investing.

"The bank thing is not of a greater magnitude than any of them," Mr. Fink said.

Nevertheless, he has made special efforts to recruit bank mutual fund organizations into the Investment Company Institute. Today, 90 banks are members of the institute, and several bankers serve on the board of directors. A few years ago, there were no bank members at all.

"We are very welcoming toward the banks," Mr. Fink said. "We want everybody in the industry to be involved in industry affairs."

Embracing Regulation

Banks that join the institute may be in for a bit of culture shock, however. "We seem to be the one financial industry that asks for and wants tighter regulation," Mr. Fink said. That, he said, is because "the only thing we have going for us is strong public confidence."

Currently, the institute is working with its bank members to develop comprehensive guidelines for mutual fund sales. The standards would be proposed to regulators as a model.

The problem, Mr. Fink said, is that the banking regulators have been issuing a patchwork of regulations. "They're absolutely inconsistent with one another. It's a total mess."

Though the institute is extending a hand to its bank members, it hasn't always been so eager to court them. Bankers say they used to be so unwelcome at the institute that they practically had to sneak into meetings.

Assimilating Banks

Mr. Fink expressed confidence that the mutual fund industry will be able to assimilate banks into its culture. In fact, he said, the industry has plenty of experience along these lines.

"When the modern industry started in 1940, almost all he p]players were mutual fund-only firms. But over the years. we've had waves of new industries entering," Mr. Fink said.

In the late 1960s, he noted, about a third of all mutual fund management firms were acquired by insurance companies, In the mid-1970s, brokerage houses began launching mutual funds.

Though the mutual fund industry's old rivalries with the banks run deep, Mr. Fink said he is doing his best to overcome them.

Four years ago, during the institute's annual membership meeting, he organized a panel on bank mutual funds. It wasn't a popular idea with the institute's rank-and-file members, Mr. Fink recalls.

One of the panel members was James Hoolahan, then a Chase Manhattan Bank executive. Mr. Hoolahan, now with Signature Financial Group, recalls that Mr. Fink gave each participant a present at the end of the session, and asked them to open it in front of the audience.

The gift was an intriguing 1933 photograph of Franklin Delano Roosevelt signing the Glass-Steagall Act into law.

Was it a reminder that the banks shouldn't get too far into the securities industry, or just a momento of a bygone era?

Mr. Hoolahan said he still isn't sure, but "everyone got a good laugh out of it."

Mr. Fink took a stab at an explanation. "I suppose what it was is, we've come full cycle. The world has reversed itself."

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