You've heard of the 800-pound gorilla?
Well, when it comes to selling mutual funds through banks, Fidelity Investments is the 800-pound octopus, its arms reaching into trust departments, retail branches, and brokerage operations.
"Fidelity has got so many tentacles in the bank marketplace because it's trying to gain entry at every access point," says Geoffrey Bobroff, a consultant in East Greenwich, R.I.
That's typical Fidelity style. The Boston-based mutual fund company - the nation's largest with $324 billion under management - prides itself on its ability to size up markets accurately and dominate them swiftly.
Its strategy in the bank marketplace has been to offer specialized services geared to niches within banks - a luxury smaller fund companies simply can't afford.
While its rivals concentrate on sales through bank broker-dealers, Fidelity fields separate sales forces for three distinct bank markets: large-bank trust departments, community-bank trust departments, and bank broker-dealers.
Fidelity has also appointed a senior executive to oversee relationships with banks that have integrated their trust and brokerage operations. And it keeps close tabs on the special needs of banks' discount brokerage units through its clearing subsidiary, National Financial Services Corp.
By blanketing banks with services, Fidelity expects to reap a healthy $2 billion in sales this year, according to Paul Hondros, president of the company's Fidelity Investments Institutional Services Co. subsidiary. That would put it in the company of two rivals that have dominated bank sales - Franklin Resources and Putnam Investments.
"Three years ago, we weren't a player in this channel," Mr. Hondros said in a recent interview at the American Banker's New York headquarters. "But we have banks embracing us now."
Fidelity's top bank clients include such powerhouses as Citicorp, Chase Manhattan Corp., Chemical Banking Corp., and Shawmut National Corp. One of the most recent big additions to its client roster was First Hawaiian Inc., Mr. Hondros said.
Bankers say brand-name recognition is one powerful reason for Fidelity's success in penetrating the bank market.
"We're probably dealing with four to six new customers a day, and one or two of those will ask for Fidelity funds," said David Reid, a broker at Old Kent Brokerage Services, Grand Rapids, Mich.
Dime Bancorp put Fidelity portfolios on its shelf two years ago when it replaced a fund family it didn't like, according to J. Edward Diamond, president of the brokerage unit at the New York thrift.
Fidelity funds are still outsold at Dime by products from Oppenheimer Management Corp. and Putnam, but the company is "big and powerful, and it's difficult to find a reason not to do business with Fidelity," Mr. Diamond said.
With their customers regularly asking for Fidelity funds, banks have overcome a reluctance to give shelf space to a company they once saw as a formidable rival, Mr. Hondros said.
Fidelity's Advisor Funds line is geared to brokers who counsel investors and charge commissions, but the company is best known for its no-load funds - those that are sold without brokers.
Mr. Hondros, 47, heads a subsidiary that markets the Advisor Funds and other Fidelity products through financial intermediaries, such as banks, financial planners, insurance agents, and brokerage houses.
Of $85 billion in assets funneled through the institutional services unit, $37 billion has come from banks, Mr. Hondros said. That's a testament to a big build-up in the sales force, he added. Over the past two years, Mr. Hondros has assembled a staff of 150 employees dedicated strictly to bank sales.
The most recent signal of Fidelity's big aspirations for sales through banks came last spring, when the company snared William O'Grady, who had headed Alliance Capital Management's bank division. He now serves as Mr. Hondros' right hand for distribution strategy, and carries the title of executive vice president.
Reporting to Mr. O'Grady are Richard Tinervin, executive vice president for large bank trust departments, who joined Fidelity last summer from NationsBank Corp.; and Andrew Olear, national sales manager for bank broker-dealers.
Mr. Tinervin, in turn, supervises Jack Callahan, executive vice president for community bank trust departments; and Nishan Vartabedian, an executive vice president who manages relationships with 26 large banks and serves as a liaison between the trust and broker-dealer groups.
Mr. Vartabedian's role is a crucial one and reveals how important it is to Fidelity to dominate both the trust and retail side at the largest banks, Mr. Hondros said.
He said bank trust departments and retail brokers are beginning to work together, and are consolidating their lists of preferred fund families. That means a fund company that doesn't serve both departments at a bank stands to lose bank clients in the future.
"Right now, we're the only firm that understands both businesses," Mr. Hondros said.
Under Mr. Hondros' direction, Fidelity has made an especially aggressive run at mutual fund sales through bank trust departments, a field dominated by Federated Investors, Pittsburgh, and SEI Corp., Wayne, Pa. Neither has a strong presence on the retail side.
Fidelity has also come out with an array of services it can deliver wherever it meets banks. It's begun promoting back-office accounting and asset allocation services through its clearing subsidiary, National Financial Services Corp.
Fidelity has begun introducing to banks Spectrum, a new trust department service that performs transactions on no-load funds from Fidelity and 40 other providers.
In what consultants considered a dramatic move, the fund behemoth also hooked up in September with Broadway & Seymour, a major trust accounting firm.
The two firms are linking up electronically, which means banks can gain access through Broadway to Fidelity's 223 mutual funds and the funds of 3,200 other companies. The deal gives Fidelity access to Broadway & Seymour's clients, which include PNC Bank Corp., NationsBank Corp., and Bank of New York Co.