BOSTON -- Competing with 'nonbank financial institutions is a top concern of bank trust and investment executives, judging from the discussions at a Bank Marketing Association conference here last week.

The 300 bankers who gathered here for the 1994 investment management and trust marketing conference only grew more worried when speakers told them how much money they would need to spend on advertising and technology to compete for customers.

Keynote speaker Paul Hondros, president of Fidelity Investments Institutional Services Co., set the tone by telling bankers that they are outclassed when it comes to using technology.

"Bankers Trust has lost its position in the 401(k) market because they can't spend the money [Fidelity] can on building infrastructure and technology," he said.

For banks that plan to upgrade their technology systems, "the price tag is very, very nigh," said Amy Errett, chairman of Spectrem Group, a consulting firm based in San Francisco.

Banks also lag behind the competition when it comes to advertising expenditures.

"Mutual fund and insurance companies spend 10 to 20 times more on advertising retirement planning services than banks do," said Martin Hunt, vice president of market planning' and development at Mellon Private Asset Management, a division of Mellon Bank Corp., Pittsburgh. "This is what we're competing against," he said.

Conference-goers lamented that persuading the wealthy to trust their investments to banks instead of brokerage firms or independent financial advisers is no easy task.

"The affluent do not see banks and trust departments as credible sources of advice," said Edward L. Stowe, vice president of trust planning and marketing at Bank One Arizona, a unit of Banc One Corp., Columbus, Ohio.

In fact, one Bank One customer compared using a bank for investment planning services to going to a fast food restaurant for a good meal.

"If Taco Beli opened a gourmet restaurant, would you go," the client asked.

"Our prospects are happy where they are, and they don't think banks provide what they need," said Mellon's Mr. Hunt.

Part of the problem lies in banks' inability to market well.

"As an industry we have a good story to tell," Mr. Stowe said.

"We have good products, performance, low fees, and services," but banks have not gotten that message across to customers, he said.

"Even insurance companies are better marketers than banks," said Harriet Grayson, a second vice president with Massachusetts Mutual Life Insurance Co., Springfield, Ma.

But it's not all bad news for banks. "Maybe yOu don't have the resources of a Merrill Lynch," said Mark Gensheimer, executive vice president in charge of bank marketing for Pittsburgh-based Federated Investors.

"But you do have powerful advantages over brokers and other competitors, he said."

For one, banks have good, long-term relationships with clients and a reputation for safety and stability, Mr. Gensheimer said.

"Studies show clients don't trust brokers as much as they trust banks," he noted.

Mr. Gensheimer said that banks have a bright future in the trust and investment management business, but they need to offer the products that clients want.

"Mutual funds can help banks successfully compete with nonbanks," he said.

Especially in the trust arena, focusing on investment products will be the key to survival, said Ms. Errett of Spectrem Group.

For banks, the middle market presents some good opportunities, said Fidelity's Mr. Hondros.

Over the next 25 years, there will be an enormous transfer of wealth, which will lead to a major increase in customers in need of private banking and trust services, Mr. Hondros predicted.

This trend illustrates the need for trust departments that target middle-tier customers, which is a market banks have "long ignored," he said.

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