The new alliance between Wells Fargo & Co. and American Express Co. is more than a distribution agreement: It initiates a joint product development effort by the two financial giants.

The San Francisco banking company's agreement with American Express Financial Corp. - a Minneapolis-based division of the New York financial services company, which is best known for its charge cards - was kicked off Thursday with the launching of two jointly developed annuity products.

The Wells Fargo Advantage Variable Annuity and the Wells Fargo Advantage Builder Variable Annuity are underwritten by American Enterprise Life Insurance Co., another Amex unit, and built around Wells Fargo's Stage Coach Mutual Funds.

Jan Breyer, a senior vice president at American Express Financial Advisors, said the agreement to distribute mutual funds and annuities is just a first step. The companies also plan to jointly develop and distribute trust and insurance products and other investment services. The agreement is not an exclusive one.

The alliance allows both companies to gain access to a wider distribution network for asset gathering without having to spend on an acquisition.

Wells' and Amex's announcement came just days after brokerage giant Merrill Lynch & Co. and London-based banking company HSBC Holdings PLC said that they plan an online brokerage alliance targeting high-net-worth investors.

Merrill's and HSBC's deal, however, lacks the glue of a joint product development strategy.

"This agreement allows us to get great products and to build great products for our customers," said Gregory Bronstein, managing director in Wells' brokerage division.

"And American Express is getting the same from us," he said.

"This alliance is a partnership, a true partnership in that we are building products together," said Mr. Breyer.

On the surface it would appear the deal is more favorable to Wells.

The banking company's $60 billion-asset mutual fund family and other products are to be distributed by the 11,300 financial advisers at Amex. At yearend, Wells had the sixth-largest bank-run fund company in the United States, and it was ranked 27th among all fund managers.

Wells, which has 850 brokers, will in turn distribute Amex's investment products through a 5,300-branch network.

Wells Fargo funds are already sold by advisers including Merrill Lynch and Prudential Securities, but the banking company's relationship with these brokers is less close than the one with Amex, and it involves waiting in line behind other fund companies, Mr. Bronstein said.

American Express distributes 45 of its own proprietary funds and sells 500 from 10 other fund families, including OppenheimerFunds, Putnam Investments, and Goldman Sachs.

Observers described the alliance in terms of the race by banks and other financial services companies to gather assets and meet customer demand.

Alliances like this have become the norm as banks look to expand their services and distribution channels, said Geoffrey H. Bobroff, a principal at Bobroff Consulting of East Greenwich, R.I.

But reaching an agreement does not guarantee smooth sailing, he said.

"There are always problems with joint ventures. Whenever you put two strong companies together there is a chance they won't mix," he said. "There is always a chance these will end up in divorce. But American Express has made a reputation for having a willingness to try these things, and I suspect, if this is successful, that more and more banks will try to distribute through joint ventures."

Burton Greenwald, a Philadelphia mutual fund consultant, said financial institutions are willing to expose their sales forces to outside products in joint ventures in exchange for potentially wider distribution channels.

"What is driving the industry right now is the clients," Mr. Greenwald said. "So you are seeing major distributors entering into exchange agreements, where they have a reciprocal understanding that we will distribute yours if you distribute ours."

Alliances are not new for either company.

American Express has been aligning itself with banking companies since 1993 when it struck a deal with Minneapolis' First Bank System Inc. to offer financial planning services in bank branches. All told, American Express has entered 10 alliances with banks and, since 1993, increased its assets under management to $262 billion.

American Express has learned from its successes and failures along the way. In 1996, it pulled financial advisers from Utah branches of what was then called Banc One Corp. and from New Hampshire offices of what was then known as Fleet Financial Group after pilot programs were unsuccessful.

Wells is not a novice in joint ventures either. It had a strategic alliance with American Skandia of Bridgeport, Conn., in 1998 in which the two companies jointly developed a mutual fund they both distributed. Mr. Bronstein said this effort's success, though on a much smaller scale than the Amex agreement, gave Wells the confidence to try the bigger alliance.

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