NationsBank Corp. has radically overhauled the pricing of its mutual funds in a bold bid to expand sales.

Starting Jan. 1, the nation's fourth-largest bank will offer its NationsFunds free of sales commissions to customers who purchase the investments by telephone or mail, a senior marketing executive at the Charlotte, N.C., company confirmed.

Until now, NationsBank has concentrated on marketing the $16.5 billion- asset mutual fund family through its brokerage sales force, charging fees - known in industry jargon as loads - in exchange for financial advice. Sales by brokers will continue, but substantial focus will be placed on marketing the no-load products, industry sources said.

NationsBank would become the only major banking company to compete in the no-load business, which is dominated by nonbank fund giants such as Vanguard Group and Fidelity Investments. Fleet Financial Group, which had marketed its proprietary Galaxy Funds without sales loads for years, reversed course last month.

In adding no-load funds to its product menu, NationsBank is betting that it can substantially boost mutual fund assets by focusing on customers who prefer to make their own financial decisions.

"If you think about NationsBank and the eight million customers we have, that's a pretty good representation of the investing public out there," said Robert H. Gordon, senior vice president for marketing at NationsBank Investment Advisors.

"Customers have different investing preferences. Some like to buy directly, and others want the hand-holding and the information," Mr. Gordon said. He confirmed the company's no-load sales strategy, but declined to discuss it in detail.

However, it is likely that NationsBank will rely heavily on Shareholder Services Group, a unit of First Data Corp., for help in building the telephone, computer, and sales support needed to push no-load funds.

NationsBank recently struck a unique deal with Shareholder Services in which the Boston-based company, working on-site in Charlotte, handles transfer agency and customer service for 250,000 NationsFunds shareholders.

The shift to a no-load strategy, announced to NationsBank employees in a memorandum late last week, took most industry observers by surprise.

Kurt Cerulli, a Boston-based mutual fund consultant, said he had doubts about the wisdom of the move. He said the bank's effort to sell funds through brokers could suffer. "It takes away one of the easier load structures for reps to explain to customers."

However, he added, the move could make it easier for NationsBank to find new sales channels for its mutual funds. For instance, he said, the no- transaction-fee mutual fund programs operated by Charles Schwab & Co. and Fidelity Investments are open exclusively to no-load fund companies.

Data from Chicago-based Financial Research Corp. show that NationsBank's load fund strategy has been struggling of late. In the first nine months of this year - a period when mutual fund sales across the industry were going through the roof - NationsBank's proprietary fund sales were nearly flat, the mutual fund researcher said.

The banking company saw only $85 million flow into its stock and bond mutual funds, and another $57 million flow out, according to Financial Research Corp. Stock and bond funds make up $6.6 billion of the total assets in the NationsFunds.

Switching to no-load funds is by no means a guarantee of broader distribution, however.

NationsBank "certainly has the wherewithal to market no-load funds, but it will be a very expensive proposition to build its brand name recognition outside their bank system," said Joy P. Montgomery, president of Money Marketing Initiatives, Morristown, N.J.

Banks have been reluctant to offer no-load funds, in part because of the difficulties involved in establishing a direct-marketing apparatus from scratch.

However, investors have clearly worked up an appetite for no-load mutual funds. No-load funds have been gaining market share steadily in recent years. They accounted for 42% of all mutual fund sales in the first 10 months of 1995, up from 38% in all of 1993, according to the Investment Company Institute.

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