As the president of Invest Financial Corp., Merlin R. Gackle oversees a company that is one of the top marketers of mutual funds and annuities through banks.

Invest, a unit of Kemper Financial Services, was founded more than a decade ago, making it one of the oldest firms in a fledgling business. But it now finds itself competing for share in a field that has become increasingly crowded with marketing companies.

Mr. Gackle says a shakeout is inevitable. He predicts a dramatic shrinkage in the number of marketing companies over the next decade, chiefly through mergers. The survivors - and he clearly expects Invest to be one of them - will have to set themselves apart by offering top service and cutting-edge technology.

Mr. Gackle, who rose to the top job at Invest last December, discussed his views on the future of investment products marketing in a recent meeting at the company's headquarters in Tampa, Fla.

Q.: What do the next 10 years hold for marketing companies like Invest?

GACKLE: Marketing firms are going to have to become financial services firms.

By that I mean they are going to have to assist their bank clients and be able to deliver investment products and services as though they were a core product of the bank.

There will be consolidation. The marketing firms, which today number close to 200, will go through what the banks did over the past 10 years.

The numbers of these firms will gradually decrease to a few that have the formula for success pretty well under hand.

Q.: What will be the role of the survivors?

CACKLE: We're going to see an expanded role for the third-party marketer in the delivery of services and the utilization of technological tools.

Good third-party firms are going to buy into interactive cable television systems and utilize those systems for the delivery of services and perhaps product.

The consumers are going to be "product-ed out." Every product is going to look the same and pricing is going to become universal. The key element that people will pay for is service.

Q.: You place a lot of emphasis on technology. Why?

GACKLE: I'm still amazed how many times I walk into banks and they don't even have computers sitting on their desks.

Banks overall have got to expand tremendously on the technology side. The major money-center banks have all done this. Technology is a key to be able to access customer growth over the next 10 years.

Q.: What is the most worrisome regulatory issue for banks selling investment products?

GACKLE: Bankers are confused and disappointed because they're having to deal with a multitude of regulators.

Unfortunately, when many bank customers walk into a bank lobby they almost feel their bodies are insured by the FDIC.

There is not enough precaution you can take to make sure a customer clearly understand that this product is not insured by FDIC. It's a hot button for every single banker today.

If they've already adopted an investment services program, then they're relying heavily on their third-party marketing firm - at least they ought to - in making sure that all the disclosure is proper.

Q.: Insurance products seem to be getting hot. What's selling?

GACKLE: The annuity is still a major product. But very few firms have been able to do more than 40% of their total annuity sales in variable annuities. Sales through Invest are currently running about 50% variable annuities. The primary reason is the interest rate environment.

Some of the major money-center banks are going to wrap their proprietary funds in variable annuities. It's already happening.

The new product coming up is the variable universal life product. You'll see it delivered through banks more and more over the next three years.

Q.: Will consolidation continue in the mutual fund industry?

GACKLE: I think that'll happen, I really do.

You're going to find some banks becoming proactive buyers of some of the mutual fund companies. Mellon Bank wasn't the first one and it won't be the last one.

The reason is that our marketplace is going to get to a point where confusion is going to prevail. It's almost there now. We've got some 4,300 mutual funds out there and the list continues to grow.

I think you're going to find a huge amount of consolidation because the economies of assets under management in these funds are going to prohibit them from continuing at the levels that they're at right now.

Q.: What about bank proprietary mutual funds?

GACKLE: You're going to see consolidation happening big time in bank proprietary funds. The reason being, they haven't been able to get the assets under management that they want.

Here's an interesting statistic: Out of $209 billion under management today in bank proprietary mutual funds, only 14% of that is attributable to new retail sales.

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