Charting winning strategies in the increasingly competitive realm of retirement planning is no easy feat.

But Keycorp, a $63.4 billionasset banking company based in Cleveland, has been trying to do just that, in the booming 401(k) niche of the retirement market.

Of course, Keycorp faces heated competition, both from banks and nonbank mutual fund companies.

"Certainly some of the best mutual fund companies are our competitors," said Robert H. Cooley, a Keycorp executive vice president overseeing the company's Prism 401 (k) plan.

He added that regional banks such as Chemical Bank, NationsBank and Star Bank have moved into some of Keycorp's most profitable markets. But Mr. Cooley said that Keycorp is faring well against the competition.

Since the current Keycorp was created earlier this year by the merger of Keycorp, Albany, N.Y. with Society Corp., Cleveland, its 401(k) assets under management have swelled to more than $2 billion.

Keycorp has added mutual funds from companies like Franklin Resources Inc. and Fidelity Investments to the lineup of investments available to 401 (k) plan participants.

Mr. Cooley believes that the experience banks have gained in managing mutual funds will help them compete in the booming 401(k) market. Of course, he adds, banks that haven't already made a push into investments would do well to steer clear of the market.

"Banks who have not had brokerage experience should not be getting into this business," Mr. Cooley said.

Fear of investor backlash during a down market has kept some banks away from investment products including retirement plans, Mr. Cooley said.

However, he says the product is no more difficult to manage than many of the trust functions that banks already do. And banks, like other investment managers, have something of an obligation to help investors prepare for future needs.

"The bulk of investors are putting their money in investments that won't even keep up with inflation," Mr. Cooley said. "Now that's scary."

Consequently, banks should take the lead in educating investors about their retirement objectives, which may be better served by higher-yielding, albeit riskier, investments, he said.

Though defined contribution plans can be a strong vehicle for marketing a bank's proprietary funds, Mr. Cooley said it's important to bring in other companies funds for proper diversity.

"Those of us working with proprietary products have to think about adding other choices," Mr. Cooley said. "Going nonproprietary is, no doubt in my mind, the way to go."

Banks considering adding outside funds should be aware that "providing choice is an expensive proposition," he said.

But profits can be made up in other areas.

Fiduciary services wrapped up with 401(k) plans can be an important source of fee revenue for banks as well as enhancing the relationship with existing customers, Mr. Cooley said.

Keycorp alone made more than $250 million of loans to customers in its 401 (k) program, Mr. Cooley said.

With the market growing so rapidly, Mr. Cooley predicts that in the near future growing pains will undoubtedly arise among service providers in the 401(k) market.

"What you're seeing now is increased pressure to placate company shareholders, and these benefits are becoming much more expensive," he said.

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