J.P. Morgan & Co.'s deal in July to buy 45% of American Century Investments was more than just a way for the bank to enlarge its already hefty proprietary mutual fund business.

The bank's $900 million investment in the Kansas City, Mo.-based fund company underlines a striking shift in strategy. Morgan, the elite institution for big corporations and the super rich, is in the midst of a major play for the high-end retail market.

It wants to take its 401(k) business to a new level, and it wants to reach beyond its traditional high-end clientele to those with liquid assets in six digits.

The alliance has made a splash in the banking and investment industries because it reflects the growing power of individual investors, a power financial institutions cannot afford to ignore.

"Individuals are increasingly important in investment decisions," said George Gatch, the Morgan vice president who heads U.S. mutual fund sales and marketing. "We have not focused on building a large branch network or serving a large number of consumers. For us to continue to be one of the preeminent investment managers in the United States and in the world, we must be a dominant mutual fund provider."

Perhaps the partnership's biggest benefit for Morgan is that it opens the door to the rich 401(k) business. Increasingly, Morgan's institutional customers are shifting from traditional defined-benefit pension plans to defined-contribution vehicles.

Morgan manages $11 billion in 401(k) assets, but it lacks the technology to expand quickly. American Century, with $10 billion in 401(k) assets, has the computer systems and customer service centers that will allow Morgan to solve that problem.

The alliance also broadens Morgan's limited fund offerings - American Century has 70 funds including aggressive growth funds, which Morgan lacks. That too should fuel the bank's 401(k) business.

"Customers demand brand-name funds and funds with strong track records," said Charles Wendel, president of Financial Institutions Consulting, New York. Morgan has "bought expertise and market position it would take them a long period of time to develop internally."

Morgan also expects to find clients for its funds and private banking services among American Century's two million customers. A hypothetical American Century 401(k) client may retire with $100,000 or more. American Century would then advise the client that Morgan offers products and services for managing that stake, such as mutual funds, brokerage, liquidity services, credit, and estate planning.

"What we want is that seamless transition," said Jeff Garrity, a Morgan managing director who oversees the U.S. defined-contribution business and sits on the Morgan/American Century steering committee. "We should collectively reach the entire client spectrum."

Joy Montgomery, president of Money Marketing Initiative, Morristown, N.J., said Morgan's "platinum card" drawing power may ensure that it succesfully nabs those customers.

"A lot of people aspire to be J.P. Morgan customers and they felt they didn't have enough money to be J.P. Morgan customers," she said.

Morgan and American Century also plan to market their funds and expertise to intermediaries such as registered investment advisers, broker- dealers, and insurance marketers.

"Clearly one of our goals is to increase assets under management, and one of the fastest-growing segments is the mutual fund business," said Mr. Gatch.

The deal allows Morgan to increase its equity stake in American Century to 50% after three years. The bank will make that decision based on whether a range of financial benchmarks are met, bank officials say.

In doing a deal to gain a small but solid foothold in the retail market, Morgan is responding not only to the trend toward defined-contribution plans but to the fact that the pool of super-rich people is only so large. Private banking accounts for $33 billion of Morgan's $239 billion of assets under management.

"There is a limited number of people at that atmosphere, and the competition is ever intensifying," said David Palmer, managing director of David Ross Palmer Associates Consultants International, East Falmouth, Mass. "This is a good way to fight their way out of that box and allow them to reach a broader market than $5 million and up."

Morgan has been lowering its walls slowly but surely for individual retail investors. This summer the bank reduced its investment minimum for its Pierpont fund family to $2,500 from $100,000.

Two years ago, Morgan made its funds available through discount brokers Charles Schwab, Fidelity Investments, and Jack White & Co.

The latest move may require more adjustment, though, according to Louis Harvey, president of Dalbar, a research firm in Boston, who calls institutional business more of a "numbers game" than the relationship-based retail business.

"Certainly they're going to have to go through some reconciliation of their cultures," he said.

And what will the strategic shift mean to Morgan's elite image?

Mr. Garrity insists that the bank is "not going downmarket," but merely working to meet its clients' needs - and has already received thanks from clients for doing so.

Even if Morgan is seen as going more populist, the payoff may be worth it, said Mr. Harvey.

"At the end of the day, it's where the money is that counts," he said.

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