Trying to tap into the growing market for small-business retirement plans, KeyCorp has launched a new product for firms with fewer than 100 employees.
The Cleveland-based banking company has been offering turnkey retirement plans, using its own family of mutual funds, for employees of midsize and large companies since 1991.
The new plan is KeyCorp's first that is specifically tailored for small businesses.
"Small business is a very high growth area," a bank spokeswoman said, adding that the business of providing retirement plans to small firms is expected to grow to $169 billion from $70 billion in the next four years.
The plan, dubbed "Prism Small Business," provides all administrative functions of 401(k) planning, including record keeping and government reporting.
The $68 billion-asset KeyCorp began selling Prism through its banks in Albany, Buffalo, and Syracuse, N.Y.; Cincinnati; and South Bend, Ind., at the end of November. Depending on market response, KeyCorp will decide around midyear whether to expand into other areas.
The small-business product is patterned after KeyCorp's Prism plan that serves 750 medium-size and large businesses in 14 states. It has $4 billion of assets under management.
Fred Cummings, an analyst with McDonald & Co., Cleveland, said KeyCorp's Prism plan, which gives employees 24-hour access to retirement account information, is a sophisticated product in a highly competitive arena.
"I don't know if it's been wildly successful," Mr. Cummings said, "but I think it's been fairly competitive."
KeyCorp officials said one of the best things about the product is the bank's history of service to small businesses.
"The addition of Prism Small Business further exemplifies our commitment to the small-business marketplace," said Sandy Maltby, senior vice president and manager of small-business services.
The plan allows employees to invest in five mutual funds from KeyCorp's Victory family. It also offers a money market fund.
Mr. Cummings said KeyCorp needs to boost its income from corporate and personal trust business.
"Overall, that area has been disappointing," Mr. Cummings said. He added that KeyCorp's trust and investment revenues grew only 2.3% in the last year.
Retirement planning has been a high-income venture, Mr. Cummings said. But a lot of financial services companies are in the business, and competition has made it difficult for banks to get market share. However, he said, fewer companies have targeted the small-business sector for retirement planning.
"There may be less competition in that market," Mr. Cummings said. "Sometimes it can't be economical. But if they get enough companies to participate, it could be a good business."
"This is certainly a step in the right direction," he added.
A KeyCorp spokesman said his company can tout its record of lending to small business as it tries to sell its retirement product. "Small business is big business for KeyCorp," said William Murschel, vice president and manager of media relations.