NEW YORK -- Bankers Trust Co. announced Tuesday that it is linking up with Charles Schwab Corp. in a bid to capture a bigger chunk of the lucrative corporate retirement-plan market.
Under the arrangement, Bankers Trust will dramatically expand the number of mutual funds that it makes available to corporate clients who run socalled 401(k) plans for employees. Such plans enable employees to set aside pretax dollars for retirement.
In addition to funds in the bank's BT Investors Funds family, the bank will offer more than 200 no-load, no-transaction-fee mutual funds that Schwab currently offers through its Mutual Fund OneSource Service. That may prove to be a significant competitive edge in the fastgrowing 401(k) marketplace, in which product variety is increasingly the name of the game.
Taking On Fidelity
"This offering will compete directly with major organizations, such as Fidelity and Vanguard, who have been able to tout the broadest possible menu of fund choices as a major com petitive advantage," said Ronald L. Bush, vice president of Access Research, a market research firm in Windsor, Conn., that tracks the 401(k) business.
By teaming with Schwab, Bankers Trust will be able to offer "a nearly unlimited selection of funds, together with their comprehensive, state-of-the-art plan services," Mr. Bush said.
The 401(k) market is attractive because it is "the fastest-growing segment of the retirement market," said Richard A. Marin, managing director and head of Bankers Trust Retirement Services.
Employees had piled $410 billion into the 401(k) plans by the end of 1992, according to Access Research. And that figure is expected to swell to $1.3 trillion by the turn of the century, making the management of 401(k) plans an attractive growth business for money managers, such as banks, insurance companies, and mutual fund companies.
Through its new alliance with Schwab, Bankers Trust plans to target "the largest companies of corporate America and some public entities," Mr. Marin said.
Clearly, 401(k) plans have emerged as "an increasingly important vehicle for accumulating long-term retirement assets," Mr. Marin said. But at the same time, "participants want a broader range of investment options and greater flexibility to achieve individual objectives."
With $105 billion in retirement plan assets under administration, Bankers Trust has been "a leader in the 401(k) industry since its inception," Mr. Marin said. "And this shows our continued commitment to the market."
The bank is working on some new offerings, especially in the risk management area, for the 401(k) market to add to its core product line, Mr. Marin said.
Spreading Its Wings
By brokering funds to the New York bank's top-drawer institutional clients, San Francisco-based Schwab will have a chance to expand its reputation beyond the retail marketplace, where it is an acknowledged powerhouse.
"It gets us further into the 401(k) market, a market we've just entered recently," said Harvey Rowan, president and chief executive of Charles Schwab Trust Co.
The Alliance could give Schwab a crack at some large corporation. "For us, it makes the funds that we offer available to a broader base," said Thomas Taggart, a spokesman for Charles Schwab & Co.
"This is our first relationship with a bank in this area," said Mr. Taggart. But he added, "We're not stopping with Bankers Trust."
In addition to providing a broader array of mutual fund products, the alliance with Schwab also provides clients with an IRA rollover benefit, Mr. Marin said.
Money withdrawn from a 401(k) plan is subject to 20% withholding, unless it is are rolled over, or reinvested, directly into an IRA. "We're providing a seamless way to rollover," Mr. Marin explained.
