Corporations don't usually feature their rivals' executives more prominently than their own in reports to shareholders. But that's what KeyCorp did last spring when it pictured Charles Schwab in living color inside the cover of its annual report.

The Cleveland-based company was trumpeting a deal it had announced last December in which it obtained access for its brokerage customers to OneSource, Charles Schwab & Co.'s pioneering no-load mutual fund supermarket.

Customers of Key Investments Inc., the banking company's brokerage unit, can buy shares through their Key account in nearly 800 no-load funds and about 400 others with a load. And they will be reminded on every statement they receive that their fund holdings are neatly organized in one account thanks to Schwab, a company they could easily call directly.

But if the partnership with Schwab raised a few eyebrows in the financial services industry, the quizzical looks haven't bothered Key's leaders.

So good is the product and so powerful is Schwab's brand identity, they reason, that the relationship can only mean more business for Key Investments and parent KeyCorp.

Jack L. Kopnisky, president and chief executive officer of Key Investments, said he wants to capture the entire customer relationship. "But to do that, you've got to have best-in-class services all the way through the line."

Although Schwab - the company and the person - gained a following by encouraging investors to bypass full-service brokers and their commissions, Schwab's customers are different enough from Key's that Mr. Kopnisky said the two companies posed little competitive threat to one another.

Key will get a slice - Mr. Kopnisky would not say how large - of the 35 basis points for each $1 in holdings that Schwab collects from mutual fund companies. But the real payoff is expected to be in boosting appeal of two fee-generating brokerage products.

One is a cash management account, already available for private banking customers but introduced for brokerage customers last April, in which investment, money market, checking, credit card, and debit card products are offered under one umbrella.

The other is a wrap account, called KeyMap, in which a basket of mutual funds is rebalanced every quarter to reflect asset allocation plans developed in consultation with a Key Investments broker.

The wrap account offers customers portfolios composed of funds managed by Fidelity Investments and Franklin Templeton, along with Key's proprietary Victory Funds. More model portfolios for brokers to choose from, with more options, will be available when OneSource is integrated into the account in January.

Key wouldn't be very pleased if customers opened brokerage accounts to trade no-load mutual funds without establishing either cash management or wrap accounts, Mr. Kopnisky said. But that did not appear very likely, he said. Even people who buy no-load funds initially tend to buy load funds eventually, he said.

Presuming the wider array of funds attracts more business to the wrap account, it will even mean more business and more fund management revenue for the Victory Funds, said Andrew Guillette, a consultant with Cerulli Associates in Boston.

That's because Victory Funds will still be included in each portfolio. Thirty-six funds in the Victory family have $9.5 billion in of assets, Mr. Kopnisky said. Its money market funds stand to be particular beneficiaries of success in the cash management account, which sweeps a client's excess cash into money funds each day, he said.

"You're essentially piggybacking on the millions of dollars that Schwab invests in national advertising," said Kenneth Hoffman, president of Optima Group Inc. in Fairfield, Conn. Mr. Hoffman, who had been consulting for both Key and Schwab, brought the two companies together.

Also, building a fund supermarket from scratch would be much more expensive than the cost of setting up systems to deliver Schwab's array of funds, Mr. Kopnisky said.

Mr. Kopnisky said he was pleased with initial response to the OneSource offer, but declined to provide any figures of either expected volume or the business level since it was introduced six months ago.

At first glance, the deal - and a similar one between Schwab and First Union Corp. - appeared to observers to risk weakening Key's identity and raised a question about why customers wouldn't deal with Schwab directly.

The risk of eroding Key's brand may be small because it isn't very strong in investments anyway. "One of the things our banks suffer from" is the limited awareness that Key is in the investment business, Mr. Kopnisky said. Key Investments has 260 brokers in bank branches, private banking offices, and stand-alone brokerage offices in regions served by Key Bank.

More importantly, observers and participants in the deal alike said Key and Schwab serve fairly different customers.

"They all won't beat a path to Schwab's door," said Charles Roame, vice president of mutual fund institutional services for Schwab & Co. In fact, he said, independent investment managers already are a conduit for $100 billion in of assets in Schwab accounts.

Bank customers are typically less independent than Schwab's, Cerulli Associates' Mr. Guillette said. With the entire supermarket of funds available, Key has a much better chance of positioning itself as a source of objective advice, he said.

Its brokers are not as highly trained as those working for major brokerage firms, Mr. Guillette said, but they can provide effective service to less-experienced investors with the wrap account and its pre-defined model portfolios. "It's an intelligent way of hand holding," he said.

As with much of the banking industry's move into the brokerage business, hooking up with Schwab is largely defensive.

"Banks are fighting a runoff of deposits," Mr. Kopnisky said. "We want to be able to give the client the alternative to going somewhere else." And the last thing many bank customers want, he said, is to open an account with yet another institution.

It is an aggressive move to the degree that the wide selection of funds helps Key recapture a share of its clients' business.

From Schwab & Co.'s point of view, KeyCorp offers additional distribution to people who probably wouldn't come to Schwab on their own. Key was especially attractive, Mr. Roame said, because it appreciates people's desire to buy no-load funds and has at least the possibility of being an industry survivor.

Neither Key's nor Schwab's executives would say how many more banks Schwab can sign up as distributors of its OneSource. Whatever the number, Mr. Guillette said Key ought to benefit from giving its customers a wider choice and getting a head start in opening the choice through Schwab.

"I don't know why there would be a downside for offering a greater diversity to their investment base," he said.

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