The largest bank in Kansas is jumping into the business of managing mutual funds, and plans to use its new offerings to expand in the lucrative business of managing retirement savings plans.
Bank IV Kansas, the lead bank of Wichita-based Fourth Financial Corp., a $6.7 billion-asset banking company, is launching seven funds with $350 million in restructured trust assets. The family has been dubbed the Funds IV mutual funds.
The bank will use the mutual fund portfolios to create 401 (k) retirement plans for corporate clients, said Phillip J. Owings, senior vice president for trust and investments.
"You can't play unless you have mutual funds," Mr. Owings said.
Other players in the area, like Boatmen's Bancshares and United Missouri Bancshares, have already recognized this, and have created their own families of mutual funds.
The banks compete for business in an area that is home to such well-known companies as Pizza Hut, Learjet, and Cessna Aircraft.
Mr. Owings said Bank IV would build its retirement plan business by courting large corporations, but the bank is not just on "an elephant hunt."
Bank IV will woo smaller companies with as few as 200 employees as well, he said.
Defined contribution plans, like the one Bank IV is offering enable corporate employees to invest a portion of their salary for retirement, and reduce their taxes by doing so.
The plans rely much more heavily on mutual funds than they used to, said Ronald Feiman, law partner at Gordon Altman Butowsky Weitzen Shalov & Wein, New York. "That's the way assets are moving."
Available in Summer
Bank IV will start making its seven funds available this summer, Mr. Owing said.
Furman Selz Inc., is the funds' distributor.
Bank IV will use its own money managers to oversee six of the funds: three bond, two stock and one money market offering.
AMR Investment Services, the money management unit of American Airlines, will oversee the seventh fund, a cash reserve money market product.
Mr. Owing had a similar arrangement with AMP, at Bank of Oklahoma, where he helped roll out a proprietary family in 1990. He joined Bank IV last July.
Bank IV will seed the Funds IV family with $350 million of collective trust assets the bank already manages for employee benefit plans.
The initial capitalization "may be a good base, but they have to have the capabilities to expand beyond that," Mr. Feiman said.
Bank IV believes it has indeed created the proper engine to ensure growth.
The bank is using Furman Selz and accountants Allen Gibbs & Houlik to offer round-the-clock service to employee benefit plan investors. Trades and information, such as current market value and investment options, can be secured at anytime through a phone call.
Mercer to Help
The bank has also hired William M. Mercer, a leading employee benefit-consulting firm, to supply employee-education programs and to keep investors up-to-date through ongoing communications.
Mr. Owings said the funds will receive an additional boost in the fourth quarter, when the bank will start offering them to branch customers.
At that time, Bank IV expects to add at least two tax-exempt offerings to the product mix.
Bank IV is considering the unusual move of tacking back-end loads onto the retail products.
This approach, done by just a handful of banks, requires arranging outside financing for fees that brokers receive to sell the products.
Most banks offer mutual funds with front-end loads, in which investors pay an up-front fee that covers brokers' commissions.