ATLANTA - For First Union Corp., "reinventing retail" means selling investment products, according to president John R. Georgius.

"The company or industry that effectively helps people manage and accumulate their capital so they can feel secure about living to be 70, 80, 90, or even 100 is going to come out the clear winner," Mr. Georgius told those who attended the American Bankers Association's annual retail banking conference.

In a keynote speech Monday, Mr. Georgius pointed out that bank deposits have grown 8% since 1989, but mutual fund growth exploded by 63%. He said this growth in investment products is fueled by demographic trends, particularly the 77 million U.S. births between 1946 and 1964, during the so-called baby boom.

Noting that people over 50 hold 80% of the wealth in the United States, Mr. Georgius said the number of people within that age category will triple within the next 18 years.

"There is a window of opportunity to reach these baby boomers that will last 18 years," Mr. Georgius said. "Our country, our industry, will likely never see this massive demographic trend again."

Mr. Georgius warned that traditional deposit products offering single- digit percentage yields would not prove adequate for these customers, who can expect to live longer than their parents and therefore are more concerned with preserving capital after retirement.

"Today, it is commonplace for someone to live until they are 85," Mr. Georgius said. "If they retired at 65, they'll have to have accumulated enough assets to last for 20 years after retirement."

First Union's response to this demand for higher yields has been to develop and market an array of investment products, particularly mutual funds. By yearend, First Union, which is based in Charlotte, N.C., will have 2,400 employees licensed to sell mutual funds and 600 licensed to sell annuities, Mr. Georgius said.

Mr. Georgius said the likely repeal of the Glass-Steagall Act, which separates commercial banking from investment banking, will allow banks to expand their range of investment products by purchasing brokerage houses.

"My prediction is that within the next 10 years, virtually all the brokerage institutions you know, with the possible exception of Merrill Lynch and Goldman Sachs, will be acquired by somebody - primarily by banks, but somebody," he said. "They simply don't have the capital to make it on their own in tomorrow's world."

Mr. Georgius added that he would prefer to get First Union's branches out of the "check cashing business" and allow them to concentrate on investment products.

"I would very much like, for example, in the state of North Carolina for the major banks to get together and each of us contribute a small portion of our branches and set up a place where we commonize check cashing," Mr. Georgius said. "So if you came into this particular location, it wouldn't matter if you were a NationsBank, Wachovia, First Union or BB&T customer, you would be able to cash your check.

"It's heresy to talk about that in our business, but pretty soon, somebody's going to be doing that."

Turning to an issue that's always a hot topic - the future of branches - Mr. Georgius said the traditional branch network isn't dead yet. "We're not enamored of the branch, but I don't know how you're going to do business without it," he said.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.