Sales executives at mutual fund and insurance companies are chomping at the bit as Chase Manhattan Corp. gets its brokerage house in order.

Since Chase's merger with Chemical Banking Corp. closed last March, the bank is more than just the nation's largest financial institution. Chase has emerged as a mammoth brokerage, boasting 300 retail investment representatives who are on track to generate an estimated $2 billion in mutual fund sales this year.

Now, vendors say Chase is undergoing a major reorganization designed to unleash its full potential as a brokerage powerhouse. Many add that Chase's investment representatives are already churning out high volumes, which hints at even better times to come.

Chase is a "behemoth" that is currently producing at the level of a "great regional brokerage firm," said Henry Schulthesz, a senior vice president running the bank sales division at Zurich-Kemper Investments.

In the meantime, a group of executives led by Chase president and chief operating officer Thomas G. Labrecque is scrutinizing the entire investment business formed by the merger of Chase and Chemical. Dubbed the Asset Management Task Force, the group is set to wrap up its conclusions by Jan. 1, said a company spokesman.

Its recommendations are expected to figure strongly in the future organization of Chase's brokerage.

Chase is keeping a tight lip on its plans, at least until then, but sales executives are poking around trying to gain some insight.

"Our sense is there's a lot of jockeying for position," said one insurance company salesman. "There's a lot of competition and territorial warfare between insurance and brokerage," he said.

Word is out that Chase wants to model its brokerage operations after those of First Union Corp. and other large banks, vendors said. Banks across the country are beginning to run all of their investment businesses under one executive, to make the programs work together rather than compete against each other for the attention of top executives.

For instance, many large banks are folding retail brokerage, private banking, trust departments, mutual fund management, insurance sales, and mutual fund shareholder services into one unit.

"You have to go to that structure, because these departments don't have any leverage within the bank if they're a series of silos within silos," explained Geoffrey Bobroff, a consultant in East Greenwich, R.I.

Chase is also rethinking its method of selling life insurance, according to a source close to the company. Unhappy with production among its more than 75 dedicated insurance agents, the company may turn to selling simplified term insurance products through its platform personnel.

At least one insurer, Principal Financial Group, pulled out of the Chase insurance program recently, disappointed in the sales of its products.

Another source insisted that the bank was merely going to add platform personnel as another channel through which to distribute insurance. The move is to match a growing demand among customers who want to buy insurance at the branch. But the company is not going to disband its insurance agency force, the source said.

Mutual fund vendors are also anxious to know who is going to replace J. Peter Benzie, the former president of Chase Manhattan Investment Services, who left in August to take an executive position at Fidelity Investments, Boston.

The bank, however, is not searching for a replacement until Mr. Labrecque's task force completes its review, the Chase spokesman said. It then plans to look both internally and externally for a new brokerage president.

In the interim, Leonard Malkin, Chase's national sales manager, is running the show.

Most fund company executives say Chase is among their top five or 10 producing bank companies. Funds that are on Chase's preferred list of mutual fund families say they haven't seen any significant sales declines as Chase tends to its merger.

"We still have the primary contact points in place for day-to-day business," said Michael Vessels, the senior vice president overseeing Aim Management Group's sales through banks.

But like much of the banking industry, Chase executives are more focused on making their merger work than on selling mutual funds, even during a year that has been a record one for the fund industry.

"To be honest - and I've run a bank program - sorting through which mutual fund companies you're going to use is not your highest priority," said Richard Davies, the former president of First Chicago Corp.'s brokerage who is now managing director of Alliance Capital Management LP's financial institutions and advisers division.

During mergers, vendors sit and wait for the bank to settle a number of issues before they're allowed to pitch their wares to reps.

Banks figure out which branches to close, which territories sales managers will cover, who will become the fund company's primary contacts, and who will provide clearing and other important technology services.

"You live through the period when they are not living up to their potential, because in the end they will come out a larger, stronger organization," added Zurich-Kemper's Mr. Schulthesz.

Meanwhile, Chase is offering very few details to fund company executives about its plans.

"Nobody is saying anything," groused one national sales manager at an annuity company. "And nobody is making decisions on how we can market our products."

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