After months of tumultuous change for its retail investment program, Bane One Corp. is said to be preparing for another big shift.
The Ohio-based banking company, which has replaced three top executives in the investment products area since June, is now shopping for a new partner to help market its $8.7 billion-asset family of mutual funds, sources close to the company said.
These Sources, who declined to be identified, said Banc One is negotiating with Bisys Investment Services Group to take over the key role of distributor and administrator of the One Group of Funds, perhaps as soon as Dec. 1.
That would be a serious blow to 440 Financial Group, Worcester, Mass., which won the Banc One contract little more than a year ago.
Eric M. Rubin, managing director for mutual funds at Banc One, denied that there are any plans to replace 440 Financial. He said the company has talked with Bisys and other distributors, but characterized those talks as routine.
Mr. Rubin emphasized that any change in the distribution contract would have to be approved by the One Group of Funds' board of directors, and that no such proposal has been considered or approved by the board.
Bisys officials said they have had discussions with Banc One, but have not made a formal presentation to the mutual funds board. 440 Financial, which is in the process of being acquired by The Shareholder Services Group, a unit of First Data Corp., declined to comment.
But several other sources, including some who are directly involved in the discussions, say Banc One is taking a serious look at moving its contract to Bisys Investment Services, a Columbus, Ohio-based unit of the Bisys Group. Inc., Little Falls, N.J.
These sources say that 440 Financial, a small company with a reputation for marketing savvy, has proved to be too small a player to handle Banc One's big aspirations in the mutual fund business. The distributor "promised more than it could deliver;' one source said.
The company's only other bank distribution contracts are with Fleet Financial Group, Providence, R.I., and Old Kent Financial Corp., Grand Rapids, Mich.
A bigger distribution company such as Bisys might be in a better position to help Bane One finance back-end loads or expand into the fast-growing 401(k) plan market, industry sources said.
What's more, sources said, the new investment products management team at Banc One wants to pick its own partner to carry out the crucial role of distributor.
Companies such as Bisys and 440 Financial handle tasks that are off-limits to banks under the Glass-Steagall Act, such as organizing and registering mutual funds and offering them for sale to the public. They frequently get involved in-mapping out marketing strategies as well.
Most of the executives who championed the selection of 440 Financial last year have since left Banc One, leaving the distributor with little support.
Among the high-level executives to step down were Paul Walsh, chairman of Bane One Investor Services Group; Robert Flowers, president of Banc One Securities Corp.; and Michelle Lenzmeier, senior managing director of Banc One Investment Advisors.
These departures, along with numerous shifts in Banc One's investment sales strategy, have raised questions about the direction of the ambitious program.
Losing Banc One's business would clearly be a significant blow to 440 Financial. Banc One, with $8.7 billion of assets in the 24 funds it manages, is 440 Financial's biggest bank client. And according to people involved in the original negotiations, the deal was worth between $5 million and $10 million a year for the four-year-old firm.
"It was a huge step forward for 440 Financial when they got Banc One" as a client, said one industry source.
Snaring a deal with Banc One would be a major coup for Bisys. The One Group of Funds is larger than any fund family Bisys currently services, and would help make up for the expected loss of the company's second-largest current fund family, the Society Funds.
The bulk of the Bisys Group's 29 clients are regional banks, a niche in which the company has long been comfortable.
One source familiar with the discussions between Banc One and Bisys said the banking company may run into some difficulties if it decides to extricate itself from its relationship with 440 Financial.
The contract has an automatic renewal clause that requires Banc One to give 440 Financial 60 days notice before switching partners, the source said. 440 Financial has invoked this clause in a bid to block Banc One from changing distributors, the source added.
