Nearly a year after they agreed to collaborate in marketing retirement savings plans to corporations, Bankers Trust New York Corp. and Charles Schwab Corp. have signed up their first client.
On July 1, Bellsouth Corp., an Atlanta-based communications company, will begin offering its 100,000 employees a 401(k) plan that was tailored to its specifications by Bankers Trust and Schwab, officials at the New York banking company said.
And industry sources said a deal is in the works to provide similar services to 65,000 employees of Lockheed Corp., an aerospace manufacturer based in Calabasas, Calif.
Michael Daley, managing director of retirement services at Bankers Trust, declined to discuss the outlook for a contract with Lockheed, but he said negotiations are under way with several potential clients.
Mr. Daley said he expects to have at least three corporate clients on board by yearend, and four more by mid-1995.
The alliance between Bankers Trust and Schwab, announced last August, has been hailed as a landmark deal that gives both partners an edge in the fast-growing 401(k) plan market.
The program, dubbed "The Window," enables corporate customers to choose among 700 mutual funds as well as individual securities to create a customized 401(k) plan.
These plans, which enable corporate employees to set aside a pre-tax portion of their salary for retirement, now hold more than $475 billion in assets and are expected to exceed $1 trillion before the turn of the century, according to Access Research, a research firm in Windsor, Conn., that tracks the 401(k) market.
Banks once dominated the business of managing retirement plans, but in recent years they have given up market share to mutual fund companies.
For Bankers Trust, the arrangement with Schwab was seen as a way to expand its fund offerings beyond its proprietary BT Investors Funds, and thereby establish itself as a serious competitor for 401(k) assets.
For San Francisco-based Schwab, the nation's largest discount brokerage firm, the deal means access to Bankers Trust's top-drawer corporate and institutional clients.
The signing of a high-profile client could indicate that Bankers Trust and Schwab have created an approach to delivering 401(k) services that big companies can accept.
"It gets them over the first big hurdle" and gives the companies a shot at penetrating the market further, said Ronald L. Bush, vice president of Access Research.
More Hurdles Seen
But others say the program still has a long way to go.
George H. Walper Jr., a consultant who has managed 401(k) programs at two major Chicago banks, said he was surprised that Bankers Trust and Schwab hadn't signed up some clients sooner.
Mr. Walper, now a consulting partner with the Spectrem Group, Chicago, said the name of the game in managing 401(k) assets is capturing a large number of corporate clients, not just a handful with large employee rosters, he said.
Though the partners' expectations for the alliance have been high, "so far it hasn't exactly been a raging success," said Eli Neusner, a consultant at Cerulli Associates, Boston.
Described as 'On Target'
Bankers Trust executives counter that the Bellsouth contract is just a start.
Bankers Trust and Schwab are "on target" in their quest to sign up 200,000 401(k) plan participants by the end of the year, Mr. Daley. For now, Bankers Trust is focusing on signing up Fortune 200 companies, he added.
Over time, though, the bank expects to serve companies that are not quite as large, said a company spokeswoman.
"It's not necessarily just for the Bellsouths of the world," she said. The offerings are flexible enough to be customized for smaller companies.
The Window offers a basic 401(k) package that can be supplemented with additional investment options at the discretion of the company that sponsors the plan for its workers.
Clients can add more products without adding extra record-keeping requirements. And plan materials can be updated easily, said Audrey Aguilar, assistant vice president for retirement services at Bankers Trust.
Seeking New Channels
Officials from Bankers Trust and Schwab said they are looking at ways to expand the alliance and create new ones.
"We're both tapping into each others distribution channels," Mr. Daley said.
For instance, Bankers Trust is offering eight of its proprietary mutual funds through Schwab's no-transaction-fee fund sales program for institutional investors. The program is a spinoff of the brokerage firm's popular One Source product line for retail customers.
"Our primary distribution channel for [these funds] in the past has been our private bank," said Thomas W. Keffer, a Bankers Trust vice president for institutional services.