Mellon Bank Corp. last week said it had created a new division to sell investment and administrative services for employee-controlled retirement plans.
The division, Dreyfus Retirement Services, has taken over and streamlined services that had been managed separately by Mellon, its Boston Co. unit, and Dreyfus Corp., which Mellon acquired in August.
"The merger of Mellon, Dreyfus, and the Boston Co. has created a dream team that instantly propels [Mellon] into the short list of very successful firms" in the retirement market, said Barbara E. Casey, president of the new division.
In industry parlance, the services the division sells are for so-called defined contribution plans, which include 401 (k)plans and employee stock ownership plans.
The unifying characteristic of these plans is that employees ultimately decide how quickly to withdraw retirement funds, and in many cases, how to invest them.
They are increasingly popular alternatives to traditional pension plans, where employers manage investments and disbursements.
Mellon and its Boston Co. unit have been particularly strong players in a back office portion of the defined contribution business, Ms. Casey said.
Dreyfus, by contrast, has had more success as a manager of defined contribution investments, by marketing its sizable Suite of mutual funds to plan sponsors.
The combination of the separate organizations' capabilities should be attractive to plan sponsors looking for a single supplier, Ms. Casey said. She added that Dreyfus lacked the strong equity investing expertise that Mellon and Boston Co. have supplied.
Ms. Casey said the one-stop shopping approach should be particularly attractive to "the larger end" of the mid-sized company market.
Large companies have traditionally sought different suppliers of investments and back-office services. But Ms. Casey said there is a new trend among large companies to seek fewer suppliers, which should help the new division.
Robert G. Wuelfing, president of investment consultant Access Research Inc., Windsor, Conn., agreed that the combination should help Mellon compete in the defined contribution market.
"It is a good marriage of three very strong companies," he said.
But Mr. Wuelfing added that the new division could find it hard to build a strong sales force for large companies, since doing so is notoriously difficult.
The retirement services division has selected 40 mutual funds, representing the full range of investment disciplines, that are being marketed for defined contribution plans.
Currently, the division is investment manager for $10 billion of defined contribution assets. Mellon is a trustee or record keeper for 700 defined contribution plans, Ms. Casey said.
