have some far-reaching effects on the state of trust banking. And that's not just for the banks in the midst of the current merger mania. These mergers will also affect the smaller banks and nonbanks - not to mention thousands of would-be and current trust clients. Starting at the top, there is some danger in the money-center banks becoming too big - in terms of client perception, if not in reality. There is a segment of the prospect population that may become a little skeptical about banks that are too big. As the money-center banks merge to become super-money-center banks, there is a perception that consumer accounts will receive less attention than commercial portfolios. Also, there is still a strong tendency for prospects to prefer to know that their bank is at least headquartered in their general locale, which may prove detrimental to money-center banks that have far-flung branch networks. In the center of this new banking terrain, the smaller institutions will, believe it or not, stand to benefit. Trust departments at selected community banks will be able to enjoy increased business, provided management takes advantage of the opportunities created by merger-mania. While there is a segment of the prospect population that professes to prefer big banks, there is another that still prefers to conduct trust business with the local banker. This segment shuns big banks and is pleased to conduct business locally - provided service and investment performance are up to par. As the surrounding money-center and regional bank trust departments grow, change their personnel, and continue to regard trust accounts of less than $500,000 as small, there will be prospects who are unsatisfied. This gives the community bank a perfect marketing opportunity. In many instances this may mean adding to the marketing budget and perhaps adding some depth to the department. But for those community bankers willing to see this strategic positioning as benefiting the bank in the long term, rewards will be paid in terms of increased new business. Consumers will certainly benefit from a proliferation of product offerings from bank trust departments as a result of the consolidation. This streamlining of the trust industry, and its resulting favorable influence on both regional and community banks, will create more visible competition for the same number of prospects. This reawakening of trust departments of all sizes will generate an increased need for some product differentiation and spawn the development of additional service offerings. As financial institutions set their strategies for these services, they will need to be continually reminded of increased competition, specifically as it relates to lifetime asset management. Prospects for these services are bombarded daily with information about the benefits of investing with brokerage houses and mutual funds - two industries that are utilizing innovation and creativity to put a new spin on the services they offer. For the existing trust department clients contemplating change, there is a temptation for many to consider a nonbank as an investment manager. For others, the call of the "simplified" approach to investing via mutual funds is strong. And still others may now feel they can "call the shots" - save on fees and do the investing themselves. Today's average prospect is much more savvy than those of 15 years ago, as well as increasingly cognizant of the fees paid. These prospects will not think twice about forgoing customer loyalty by switching allegiances and accounts. Alert financial institutions must answer this increased competition with product creativity, increased investment performance, increased personal service, and a wider variety of services that will allow the client to stay in the driver's seat to the extent he or she desires. In addition, those same financial institutions must step up to the plate and squarely address and promote the benefits of joining (or staying with) their bank investment management services. This includes addressing the advantages they offer over brokerage houses and direct investing in mutual funds. The consumer stands to benefit from all of this. Mr. Phillips is president of Trust Resource Co., a Portland, Conn.- based financial services consulting firm.

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