With Congress' recent approval of President Clinton's tax package, consumers have been scrambling for ways to protect their money.

Under the new law, the top personal tax rate climbs to 39.6%. Add state and city taxes to that, and high-income investors could be facing hefty tax bills come April.

Banks and mutual fund companies say one result has been heightened interest in tax-exempt mutual funds.

Such funds, which invest in bonds issued by states and municipalities, are considered relatively conservative investments, and have long had a following among safety-minded bank customers.

Bank and mutual fund executives say that customers' enthusiasm for tax-free investments has spilled over into other products such a tax-deferred annuities and insured mutual funds.

Eaton Vance

Congress had just approved the tax bill when Boston-based Eaton Vance Corp. shifted a promotional campaign into high gear.

Eaton Vance, which specializes in tax-exempt funds, immediately got to work printing and shipping new marketing materials to banks, according to Brian Jacobs, senior vice president in charge of bank sales.

Once the tax bill was passed, Mr. Jacobs authorized the production of brochures and cards that explained the new tax rates and how Eaton Vance products can help bank customers protect their money.

"Investment representatives at the banks have just begun to distribute them, and the phones are starting to ring," Mr. Jacobs said.

"I think the requests for information will continue to surge in the coming months," he added.

Biggest Provider

Eaton Vance markets 40 tax-exempt mutual funds, making it the largest provider of these kinds of funds in the nation.

The firm has over $3 billion in tax-exempt assets under management, with 25% of sales coming through banks.

"My sense is that we'll see a spike in sales. But we won't know the exact figure until the third-quarter reports are in," Mr. Jacobs said.

Among all their offerings, Mr. Jacobs said that bank customers have become increasingly interested in Eaton Vance's limited-maturity tax-free funds.

These products have a duration of about six years and offer about 80% to 85% of the yield of a long-term municipal fund, but with half the net-asset-value volatility.

"A fund like this is a good baby step into mutual funds," said Mr. Jacobs.

Eaton Vance has had particular success with its limited-maturity funds in banks that use platform employees with limited brokerage licenses to market mutual funds.

"Series 6 representatives are restricted in what they can sell," he said. "Our limited-maturity funds are very conservative and often make it onto their |preferred lists.'"

Banc One

Sure and steady are the watch-words at Banc One Corp.

Consumer interest in tax-exempts has been consistent all year, and there wasn't a sharp increase in sales when President Clinton's tax plan was announced or when it was approved, according to a top mutual fund executive at the Columbus, Ohio-based superregional.

Sales of five proprietary tax-exempt funds have increased 30% since January, said Michelle Lenzmeier, a senior vice president who oversees the One Group of mutual funds.

Gradual Increase in Sales

This figure doesn't take into account the sales of the One Group's new tax-free bond fund, which was introduced last February. This fund has logged over $70 million in sales.

"There has been a definite but gradual increase in sales. People are concerned with protecting their income," said Ms. Lenzmeier. "My sense is that our customers anticipated the tax changes and have been preparing for them for several months now."

To further address the need for tax-exempt products, Ms. Lenzmeier said that Banc One will launch five proprietary variable annuity products during the first quarter of 1994.

Like the One Group of funds, the annuities will be managed by Banc One Investment Advisors.

"We're seeing a demand in the bank channel for variable annuities. They have been extremely popular," she said. "Again, given the tax law, they are even more attractive."

Alliance Capital

At Alliance Capital Management. sales of tax-exempt funds through banks have soared a dizzying 400% since last year, according to William O'Grady, senior vice president for bank sales.

The New York-based mutual fund company runs nine tax-exempt funds, with aggregate assets of $4.5 billion. Of that total. 16% of sales have been generated by banks, Mr. O'Grady said.

Sales are being driven by three trends, he said. "First, bank customers continue to move their money out of CDs. That's still going on."

Also, President Clinton's plan has increased consumer appetite for tax-exempt products. Finally, "the fact that we introduced five new tax-exempt funds this year has also boosted sales."

Dime Savings Bank

Variable annuities are also catching on at Dime Savings Bank in Brooklyn, N.Y.

J. Edward Diamond, senior vice president of Dime Securities of New York Inc., said annuity sales dropped last year, but since the approval of President Clinton's tax plan, sales are on the upswing.

"A year ago, annuities represented 40% of total investment products sales," he said. "Then that figure dropped to 30% this year.

"Since the President's tax plan announcement, the trend has reversed. It may be coincidental, but really don't think so, because consumers are smart."

Tax-exempt mutual fund sales are also increasing. Mr. Diamond said that the Dime sells about $300 million in funds annually, with 52% of that figure representing tax-exempt products. He also reported that nine months ago, that figure was only 40%.

Droyfus Corp.

At the Dreyfus Corp., sales of tax-exempt mutual funds have increased by 80% since the beginning of the year.

Elie Genadry, president of the New York company's institutional services division, attributes at least 40% of that figure to customers' response to the Clinton tax package.

He also expects a surge in sales in the coming months. "A couple of things are happening," said Mr. Genadry. "Tax-exempts are booming, and ont all consumers are aware of the impact of the Clinton plan. The response comes in waves."

Psychology also plays an important role. "We're seeing people flock to tax-exempts, even if they might be better off in another kind of fund, simply because they are worried," said Mr. Genadry.

Dreyfus currently sells 18 tax-exempt funds through banks, representing $4.2 billion in assets under management.

Insured Bond Fund

To meet customer demand for these products, Dreyfus last week introduced its first fund consisting entirely of insured bonds - the Dreyfus California Insured Mutual Fund.

Mr. Genadry said that over the next 60 to 90 days, Dreyfus will introduce another 12 statespecific insured funds.

These funds will be launched in states with known or perceived budget problems.

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