Fidelity Investments has launched a wrap account service that allows banks to choose from hundreds of mutual funds.

Through its clearing arm, National Financial Services Corp., Fidelity introduced Fund Counselor, which offers a menu of 370 Fidelity and non- Fidelity no-load funds in addition to the portfolios a bank manages.

Banks that offer wrap account services typically include the offerings of two fund families - their own and one with a lot of name recognition.

But investors are demanding far more choices than is typically available, said Robert Middleton, vice president, correspondent services at National Financial.

Mr. Middleton said few companies can perform the complex management and record-keeping services for a multitude of different wrap account programs.

So Boston-based Fidelity has hooked up with Portfolio Management Consultants, a Denver-based company that will help National Financial customize and manage each wrap account for every bank.

National Financial charges customers 0.03% of assets under management. Portfolio Management gets 0.25% to 0.50% of assets under management, Mr. Middleton said.

Wrap accounts are designed for investors willing to make a high initial investment and pay a hefty fee to get professionals to manage their portfolio on a daily basis.

Wrap accounts are gaining in popularity among investors who prefer giving brokers a standard fee instead of the traditional commission for every transaction. Wrap accounts currently manage $17 billion in assets, up from $12.2 billion at the end of 1994, according to consulting firm Cerulli & Associates.

National Financial has more than 80 bank broker-dealer clients, more than any other clearing firm. Earlier this year the company introduced a similar service called Symphony, but like many other wrap account services it limited the number of funds a bank could offer customers.

Some small banks without their own funds offer Symphony, but the banks that manage their own portfolios don't want to give away all their customers' assets to Fidelity.

"If a bank's funds aren't in the wrap account, then the bank's heart won't be in it," Mr. Middleton said.

But banks have limited their fund offerings in part because few firms are willing to manage and perform back-office functions for such complicated programs.

The company managing the wrap account has to rebalance each investor's portfolio when markets change. It then has to generate quarterly performance reports for each customer and bill them accurately.

Mary McAvity, a consultant at Cerulli Associates, isn't convinced that banks want to complicate their current wrap-fee offerings. She said record- keeping snafus could drive away customers.

"When you start using many fund families and many different portfolios and hundreds of clients buying and selling these things, it's an operational nightmare," Ms. McAvity said.

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