By dropping sales loads on some of their mutual funds, major banks are sending a message: They want to play in the same league as giants like Fidelity Investments and Vanguard Group.

The strategy will enable banks to attract savvy investors who like to buy mutual funds via telephone or mail without paying a sales commission.

But there may be a problem, observers say. Most banks designed their funds to be sold through their own brokers or financial planners, who charge for investment advice.

"Distribution is one of the keys to success, and this is a totally different distribution system" than what banks are used to, said Joy P. Montgomery, a consultant at Money Marketing Initiative, Morristown, N.J.

By waiving sales fees, banks have paved the way to sell their funds through the wildly popular fund "supermarkets," where consumers can choose from among 200 to 300 no-fee portfolios. The problem, however, is that banks, in trying to add no-load funds to their usual mix, are reaching out for an entirely separate set of investors.

Banking titans, including Citicorp, NationsBank Corp., and Barnett Banks Inc., have recently said they would offer some of their funds without charging a load, the up-front fee for investment advice. Executives at Norwest Corp. and Union Bank of California have also said they are considering no-load policies for their funds.

Theoretically, giving customers the choice to pay a premium for investment advice or to buy funds without a fee is a good strategy, said Avi Nachmany, a partner at Strategic Insight, a mutual fund marketing consultancy in New York.

"But it's a difficult task because they take two mind-sets," he added. According to Mr. Nachmany, the only company that has successfully marketed both load and no-load funds is Fidelity.

When NationsBank dropped up-front fees on its NationsFunds Jan. 1, it bet that customers were willing to forgo advice to get a price break. But many fund executives, including Mr. Nachmany, say that wager may not pay off, particularly if the stock market declines.

"Going forward, more, not (fewer), customers will seek advice," he said.

Indeed, Fleet Financial Group discovered through a customer survey that investment guidance was more important to investors than lower fees, said Maliz Beams, director of marketing and strategic planning. The Boston-based bank company marketed its Galaxy Funds without a load for years but changed course after its 1995 merger with Shawmut, she said.

Still, other banks feel they have to go no-load if they are to be viewed as serious mutual fund competitors.

"If we don't offer them, we'll miss half the market," said R. Gregory Knopf, managing director of Union Bank of California's Stepstone and HighMark funds. Union Bank's two fund families came together when Union Bank merged with the Bank of California in April.

The Los Angeles-based bank is considering various no-load strategies, Mr. Knopf said. One may be to sell the HighMark Funds no-load while retaining a front-end load on the Stepstone Funds, according to Union executives.

Citicorp, for its part, plans to make permanent a no-load promotion for its new CitiSelect fund family. By offering the new funds without sales fees, the bank was able to attract $450 million of assets in four months.

"Banks are going no-load because that's what the market is doing," said Richard Ross, a consultant at Fifty-plus Communications Consulting, Glencoe, Ill. "It's a perfectly rational decision, but the real decision is how to execute it."

According to Ms. Montgomery, banks that want to go no-load would be smart to hire seasoned executives from experienced companies. No bank, she said, has in-house expertise in this area.

Barnett hired Richard Jones, formerly of Fidelity and Fleet, in May 1995 to run all its retail business lines, including asset management and the brokerage unit. He has since brought several other Fidelity alumni to the company, which has recently announced plans to offer its Emerald Funds through Fidelity's fund supermarket.

And NationsBank lured two executives this month - one from Fidelity and one from Charles Schwab & Co. - for its investment product business. The Charlotte, N.C., banking company plans to launch its own fund supermarket to compete against Fidelity's and Schwab's.

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