ON THE BEAT: NationsBank Exec Sees Funds Becoming Core Part of Banking

banks are faring in the mutual fund business. In a speech last week, the mutual fund group executive at NationsBank Corp. delivered a blunt assessment of banks' progress. "Banks have been disappointing in their promises of distribution," Mr. Williamson told a Charlotte, N.C., gathering of the National Investment Company Service Association. "By and large, they have not really turned customer access into distribution." Banks, he said, account for just a slice of fund industry assets - about 14% - and for under 10% of sales. "Being 50 years late to the party has something to do with it," he told some 100 mutual fund operations executives. But if Mr. Williamson is underwhelmed by what banks have accomplished so far, he is clearly optimistic about what lies ahead. Consumers are increasingly hungry for financial advice, and their buying patterns strongly favor banks, he said. Within 10 years, Mr. Williamson said, nontraditional products such as mutual funds and annuities will become a core part of the banking business. Mutual funds certainly have become integral at NationsBank. Mr. Williamson oversees a fund business whose assets totaled $15.9 billion on Sept. 30. according to Lipper Analytical Services, Summit, N.J. That places NationsBank third among banks that manage mutual funds - and in the top 30 of all U.S. mutual fund companies. Though NationsBank puts a lot of emphasis on the steady growth of its fund assets, Mr. Williamson said he is not convinced that a fund family has to be huge to survive. Small, nimble players will occupy an important niche alongside large companies that can be forceful in delivering services, he said. "What I am convinced is that it's very difficult to be an in-between- size financial services company, whether you're a bank or a mutual fund company," Mr. Williamson added. He said acquisitions, touted as an important avenue for growth, are less critical than is commonly thought. "That's one area where some people might be surprised at the slow pace," he said. "If you just try to acquire a company and have not figured out how to integrate it, then I'm not sure what value it has to you." Attracting seasoned executives from the mutual fund industry who can help banks build a sales culture may prove more important, he said. "If you bring in a few individuals, it can make a big difference over time to your business." He also stressed the need to find partners with expertise in fund operations. "I would predict that outsourcing will accelerate rather than decelerate. "It's a great way for banks to bring in expertise without having to actually buy it." Mr. Williamson is practicing what he preaches. NationsBank has formed an unusual partnership with the Shareholder Services Group. The company, a unit of First Data Corp., has employees in NationsBank's Charlotte offices who provide transfer agency and other shareholder support services to 250,000 mutual fund accounts.