As part of an effort to make a comeback in the bank market, Colonial Mutual Funds has rolled out a new portfolio that it is pitching to bank trust departments.

The Boston-based fund company, which has seen its bank market share slip over the years, is offering a growth fund created for the untapped middle- market-customers with less than $500,000 to invest in a trust.

Such investors want to set up trusts for estate planning purposes just like rich people do, but they often don't know they can, said Stephen Gibson, president and chief executive of Colonial. At the same time, banks often want to serve such customers but haven't found a cost-efficient way to manage their assets or market to them.

"Here's a tool to get people into a dialogue with you," he said.

The Colonial Tax-Managed Growth Fund comes with a simplified trust form in the back of the prospectus which allows banks to set up a trust for customers without sending them to a lawyer or other estate planner.

The portfolio is also designed to feature a low turnover of stocks, thereby reducing an investor's capital gains taxes.

Mr. Gibson, the new product's designer, was recruited by Colonial last summer to help reinvent the mutual fund company. The former head of corporate development at Putnam Investments, he was given the top post at Colonial this month.

The hiring of Mr. Gibson-who made his mark as a marketing and product development wizard at Putnam-was a real coup for the much smaller and struggling Colonial.

But whether bankers will take to Mr. Gibson's latest product remains to be seen. The simplified trust form has been a source of controversy among lawyers who claim laymen are not always qualified to do their own tax planning.

Financial planners and other advisers that get involved in a client's estate planning needs have long argued that customers don't need a high- priced lawyer to set up a trust or write a will. But lawyers, who don't want to lose the business, disagree.

"Those are legal issues that a bank should not be advising their clients about," said Joseph Hodges, an estate planning lawyer in Denver.

Furthermore, Colonial may run into trouble on a competitive level. Many banks have been offering the same simplified trust form as a way to get investors into their own mutual funds.

Mr. Gibson insisted that banks need all the help they can get because they are losing baby boomer customers. He cites a study conducted by VIP Forum, a Boston-based research group, that found 69% of investors who hold most of their assets at banks expect to move their money to a new financial adviser.

Colonial is trying to turn around its bank marketing program, which has suffered during the stock market's bull run. The company is known primarily for its fixed-income portfolios.

Financial institutions, which once generated 22% of Colonial's sales, now account for only 17%, Mr. Gibson said. "We'd certainly like to return to where we were before, and quickly," he said.

Colonial, which manages $16.6 billion of assets, was acquired by Liberty Financial Cos., a Boston-based financial services company in 1995.

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