Vying for more shelf space at banks and other brokerages, mutual fund companies are boosting the sales commissions they pay to brokers.

Colonial Group Inc., Boston, is now paying a 5% commission, up from 4%, on its equity funds with back-end loads, said Stephen E. Gibson, president and chief executive officer.

The increase, which took effect about 90 days ago, has helped spur sales at several banking companies, including Banc One Corp., Fleet Financial Group, and BankBoston Corp., Mr. Gibson said.

The change could help Colonial's overall sales to rise to $3 billion this year, from $2.2 billion in 1997, he added during an interview at the Investment Company Institute's annual meeting here last week. He said he expects bank sales to spurt to $1 billion, from $600 million.

Colonial and Federated Investors, Pittsburgh, are among the first to boost their commission level on so-called B shares, he said, adding that he expects other companies to follow suit soon.

B shares carry back-end loads, meaning sales charges paid by investors are deferred until redemption.

Colonial, which offers the same 5% commission to its nonbank brokerages and financial planners, is financing the commissions without increasing the expense ratio that investors pay-1.8% of assets for a typical equity fund share, Mr. Gibson said.

Fund companies that sell through intermediaries like banks have increasingly replaced the once-predominant front-loaded A shares with B shares since about 1991, to compete with no-load funds.

For instance, B shares account for 45% of Colonial's sales through banks, nonbank broker dealers, and financial advisers, while shares featuring traditional up-front loads account for another 45%, and "level- load shares," a hybrid, make up the rest.

B shares can be more lucrative than A shares: Investors who own B shares are discouraged through penalty charges from cashing out their investment before a certain length of time. With the shareholder's money staying put, the fund company is assured of collecting annual fees for managing those assets.

"The economics are pretty favorable," said Mr. Gibson, whose company does a fifth of its sales through banks. It has active selling relationships with 22 financial institutions.

Colonial's high expectations for the bank channel stem only in part from the new commission arrangement. The company is also in the midst of a sweeping effort to reinvigorate bank sales.

Last year Colonial's parent company, Liberty Financial Cos., hired Putnam Investments executives Louis Tasiopoulos and John Bartlett to boost the bank effort, and Colonial increased its dedicated bank wholesaler corps to about a half dozen.

The decision to refocus on banks came after Colonial in 1996 directed its energies away from banks and onto wire houses, which along with regional brokerages are the company's major source of sales.

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