Daunted by the costs of providing customized money-management services to relatively small investors, banks increasingly are turning to vendors to manage accounts of less than $100,000.

Bank trust departments are experiencing a surge in business from this segment of clients, a group that includes the coveted "emerging affluent." But it's rarely profitable for a bank to give these accounts the personalized attention clients seek.

To help banks meet the demand for individualized services several technology-oriented companies are expanding their menus to include money- management offerings tailored to banks' specifications.

These vendors include Federated Investors, SEI Corp., and Pershing, the securities processing arm of Donaldson, Lufkin & Jenrette. They are creating wrap accounts, which can be marketed to an entire class of investors, such as people who want only international exposure, and managed accounts, which are tailored to the investment preferences of an individual.

The products enable banks to hand off the money management and record- keeping chores while still offering clients help in picking investments and keeping their strategy on course.

Bankers say such products are meeting an important need.

"They have come up with some products that are helpful to us in order to take on more business," said William A. Helmbrecht, vice president of Irwin Union Trust Co., Columbus, Ind. The company is one of 117 banks that use wrap accounts and retirement programs from Federated, based in Pittsburgh.

Without such products, the bank would have to either turn away smaller investors or lose money trying to help them, Mr. Helmbrecht said.

Investors typically pay banks an up-front, flat fee of a few hundred dollars for administering the account. They also pay management fees - often about 1% to 1.5% of the account's value - to the money manager.

At Pershing, nearly 20 bank clients have signed up for wrap accounts and managed accounts since the Jersey City firm began offering them in 1994. Pershing now manages $1 billion in such accounts.

Although Pershing handles the money management, the accounts are "private-labeled" by the banks, making them look like bank products, said a senior vice president of Pershing, who did not want his name used. "If you go to two banks across the street, none of these products look alike because they are completely customized."

Federated's bank clients typically outsource for investment styles that need a specialist with a proven track record, said Ronald M. Petnuch, a senior vice president.

"They can't really repeat that in their own shop, so they'll employ the specialist as a subadviser," Mr. Petnuch said.

Federated offers two asset allocation program for banks. Its Goldmaster program is for wrap accounts and the Managed Series Trusts houses pooled investment funds for trust departments.

His company, too, emphasizes customization. "If you look at what's being done for Signet Bank and Wachovia, you wouldn't realize it was being done by the same company," Mr. Petnuch said.

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