A start-up unit of BHC Financial, a large securities clearing firm, has won a hard-fought battle to run the mutual fund and annuity sales program at Chase Manhattan Bank.

BHC Marketing, the new unit, beat out established investment product marketing firms, including Independent Financial Marketing Group and James Mitchell & Co., to take over a sales program that GNA Corp. ran for the past four years.

Philadelphia-based BHC Mar. keting, which was set up six months ago, won Chase over with its flexibility and the technological support of its parent, officials at the big New York bank said.

The marketer will formally make Chase its first client early next year, in what bank executives call a major turning point for the sales program.

The new arrangement "is designed to give us more of a hands-on approach," said Salvatore M. Capizzi, Chase vice president overseeing the program.

To this end, Chase and BHC will jointly choose products, develop compensation arrangements, and design and carry out promotions and other marketing measures, Mr. Capizzi said.

The structure is something of a switch from the way things were done in the past, with Seattlebased GNA calling the vast majority of shots, Mr. Capizzi said.

He added that BHC has the capability to produce statements that display investment product holdings as well as more standard savings and checking account information.

Chase has one of the industry's biggest investment products prognure, with $700 million of mutual funds and annuities sold last year. The bank deploys 140 sales representatives through 350 branches in New York, Connecticut, and Maryland.

GNA, a unit of GE Capital, "has done a great job," Mr. Capizzi said. "But our philosophy in terms of bank programs is a bit different." For its part, GNA is philosophical about the loss of its biggest client.

"This is part of the normal evolution of sales force management relationships," said GNA president Patrick E. Welch in a statement. "Chase, like other GNA clients before them, desires greater control and influence over_ sales and marketing initiatives."

Mr. Capizzi indicated that Chase's next step may well be to take the program over entirely, but right now the bank is comfortable stepping up its involvement and working with an outside marketing firm. In fact, Chase already has started putting its imprint on the pwgram.

BHC, at Chase's urging, will place sales representatives primarily on salary, instead of continuing to compensate them through commissions. The change will safeguard against the possibility of a representative pushing a particular product, allowing it pays a higher commission than another, possibly more appropriate, choice, Mr. Carizzi said.

Chase and BHC also plan to revise the bank's product list, adding more fixed annuities to accompany a GNA annuity product that will still be available. Chase also will continue to make GNA's mutual funds available as part of a mix that includes the bank's own Vista funds.

BHC, although new to helping banks operate investment sales programs, has spent the past decade as one of the largest suppliers of clearing services for banks. Clearing agents like BHC Financial execute brokers' buy and sell orders, and prepare and mail trade confirmations and account statements. The company, which was started in the early 1980s by a group of large banks, is now publicly owned.

The decision to take a front line role as investment program manager "was as a natural extension for us," said William T. Spane, Jr., BHC Financial's chairman.

Mr. Spane added that BHC is out to add more bank clients to its new unit. Still, industry observers called Chase's decision somewhat curious.

BHC "has wonderful systems. good distribution services, and will give its full attention to Chase as its first client," said Richard Ayotte, managing partner at American Brokerage Consultants, St. Petersburg, Fla.

But the fact that BHC lacks a track record as a retail investment program manager "does introduce a certain amount of risk," Mr. Ayotte.

Mr. Capizzi, however, is not worried "with all the due diligence we did, we are extremely, extremely comfortable with all that BHC brings to file table," he said.

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