Now that regulators have approved its plan to convert a big chunk of employee benefit assets into mutual funds, Norwest Corp. Is stepping up its drive into the 401(k) plan market.
The conversion, involving $2.5 billion of assets, should enable Norwest to compete forcefully in the booming business of managing corporate retirement plans. executives at the Minneapolis banking company said.
Mutual funds have become the investment of choice in many 401(k) plans, which are corporate-sponsored plans that enable workers to save a portion of salary for retirement and reduce taxes in the process.
Market Demand Cited
"We're responding to what the marketplace has been demanding," said Laurie Nordquist, vice president overseeing Norwest's employee benefit program.
The asset conversion, the largest by a bank so far this year, has been in the works since late last year and was approved by the Securities and Exchange Commission in June.
The shift to a mutual fund structrue affects 1,400 employee benefit plans with 250,000 participants. It is expected to be completed Nov. 11, Ms. Nordquist said.
A Switch to Mutual Funds Norwest Corp. is convertingits employee benefit offeringsto a mutual fund format,effective Nov. 11 Why? Mutual funds are anincreasingly popular investmentchoice for 401(k) and otherretirement plans Plans affected: 1,400 Participants: 250,000
Broad Marketing Target
Once that happens, Norwest plans to market its 401(k) mutual fund services nationally and will aim to reach a wide range of companies - with as few as 50 employees or as many as 10,000.
Norwest is not alone. In the past year, several major banks-including Bankers Trust New York Corp. and Wells Fargo & Co. - have identified the 401(k) business as a key part of their mutual fund strategy.
Norwest's asset conversion creates a new class of mutual funds designed especially for the 401(k) market. The bank also manages $4 billion in the Norwest Funds, a line aimed at retail, trust, and institutional customers.
Seen as Extension of Service
Banks are going after the 401(k) plan business in part because they see it as a natural way to build on their relationships with corporate customers.
Clients who use a bank for payroll, cash management, and loans are seen as strong prospects for retirement services.
At least one Norwest client who already uses the bank's employee benefits services said she welcomes the switch to mutual funds.
"It's a good way to go," said Marietta Soukup, co-owner of Soukup Construction Co., Sioux Falls, S.D., which sponsors a plan for its 45 employees.
Watch Price Listings
The employees are accustomed to mutual funds and like the fact that fund prices are published daily, Ms. Soukup said.
"Even if you don't have time to look in the paper every day, it's good to know they're there," she added.
Though Norwest is eager to expand its 401(k) business, the priority for now is to make sure that existing customers are comfortable with the shift, Ms. Nordquist said.
Bank representatives will spend the summer meeting with many of the companies that are affected by the change, she said.