A New Hampshire bank has found a way to keep its frail 401(k) program on life support while trying to grow by embracing a new outside program with daily valuation and a voice-response system.

First New Hampshire Bank, based in Manchester, N.H., with $3.7 billion in assets, was faced with a limited 401(k) product called Symmetry, which had only $78 million in assets but fiercely loyal customers.

Not having enough plan assets to warrant upgrading its record-keeping abilities, the bank looked for ways to expand its 401(k) product line without forcing the existing 80 plan sponsors into a new product, said John I. Snow, president and CEO of the bank's subsidiary, First N.H. Investment Services.

The solution was to hand the existing record-keeping to Pittsburgh-based Federated Investors while offering Federated's 401(k) products to new customers.

Mr. Snow explained that the 401(k) "is clearly a product that calls for volume - the advantage is with Federated's volumes."

Closing the Symmetry plan to new investors, the bank hopes to lure companies of 2,000 to 3,000 employees into Federated's product line.

Symmetry, which offered investors a choice of individually managed stock and bond portfolios and bank-pooled funds, also offered mutual funds from a range of big-name companies.

That held great appeal with some companies, which would be reluctant to move from Symmetry for a daily-pricing amenity, said Margaret Wiebusch, vice president for regional employee benefits at First N.H. Investment Services.

"Symmetry is favored by smaller companies whose CEO gets directly involved in the decision-making process," Ms. Wiebusch said. "He may have not heard of Federated but wants to put money in Putnam."

So Symmetry, which came to First N.H. when it acquired another New Hampshire Bank - Amoskeag Bank in 1991 - will stay on the books as long as major customers wish to stay with the product.

Meanwhile, bank and Federated officers expect new 401(k) participation among First N.H. customers to grow rapidly despite strong competition from other mutual fund companies, local brokerages, and such big Boston players as State Street Bank and Trust Co.

Ms. Wiebusch said First N.H.'s advantage in the New England 401(k) market was its commitment to service.

Even though Federated is coming aboard, the bank will continue to use its six 401(k) sales representatives in its 78 branches in New Hampshire and Massachusetts.

"We solve people's problems," she said. "The local investor runs the risk of getting lost with a larger company."

By keeping the contact with employees of First Investment Services, the bank does not worry about losing customers to its third-party provider, she said.

Federated's lack of name recognition is a barrier in selling to some smaller companies, Ms. Wiebusch said. But Federated's excellent Morningstar ratings are a real selling point to those looking beyond name recognition, she said.

And the Federated 401(k) product, Lifetrack, offers an option to invest in some well-known mutual fund families.

Federated does have a recognition problem with customers in New Hampshire, concedes Stephen Cronin, vice president and national director of trust marketing for Federated.

Although Federated has been advertising in The Wall Street Journal and Money magazine, it doesn't yield the results and recognition that some larger companies, like Fidelity, can garner with huge advertising campaigns.

But it's a problem that can be overcome with investors, Mr. Cronin said.

"You don't have to use just Federated Funds," he said. "And we can piggyback on the recognition of these other funds."

"We have great growth expectations," Mr. Cronin added. "We think this is the Cadillac program in that region."

Mr. Cronin said that unlike so many banks that third-party companies deal with, First N.H. has a big advantage in that it already knows the 401(k) business through its Symmetry record-keeping. "There's no substitute for that experience," he said.

Federated, which doesn't have any other major 401(k) relationships in the area, will have one dedicated employee providing support to First N.H. sales representatives. In addition, Federated will conduct seminars at First N.H.'s request to educate bankers and customers about 401(k)s.

Until recently, Federated has refused to consider taking on record- keeping for existing programs until recently. Its change of mind could now result in much new business, Mr. Cronin predicts.

"First N.H. is special in that it got us to look at this business a little differently," he said. "We had not been quite as accommodating operationally and now we've made strides to say that we will take the business as it is."

Just a few years ago, Federated would have told First N.H. to move the customers into one of its own products or Federated would reject the entire relationship, Mr. Cronin said.

"Now we're taking a long-term view," he said.

So is First N.H. Mr. Snow points out that it wants to be a part of its customers' life when it comes to 401(k)s to build on their relationship.

By offering the features that are now often requested, Mr. Snow predicts healthy growth with Federated as a partner.

Most of that growth will be in New Hampshire, though the bank also has an office in Boston owned by its parent, Bank of Ireland.

Mr. Cronin said he expects to have 5,000 employees covered by Federated's Lifetrack product within a year - with a target of continued growth of 5,000 a year.

Mr. Moore is a freelance writer based in Mount Vernon, Maine.

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