PNC Latest to Bolster Its 401(k) Plans with Outside Funds

In the red-hot competition for 401(k) plan business, some banks are turning to mutual fund companies for help in spicing up their product offerings.

PNC Bank Corp., for example, recently overhauled its proprietary plans to include the products of big-name fund companies such as Janus Capital Corp., Fidelity Investments, Scudder Stevens & Clark, and Invesco Funds Group as well as its own mutual funds.

The Pittsburgh-based banking company's move follows similar alliances with outside fund companies by Bankers Trust New York Corp., First Union Corp., and Norwest Corp.

"We found that if we didn't offer a broad range of fund choices, we weren't able to attract the business in the first place," said Bryan Garlock, a senior vice president at PNC's Retirement and Investment Services division.

More and more, banks are adding portfolios from well-known fund companies to entice midsize and small companies to use bank-managed retirement plans. The mad dash by banks to differentiate themselves from other 401(k) plan vendors such as mutual fund and insurance companies may accelerate as more players enter the retirement plan market, experts say.

While the extra fund offerings are meant to supplement a bank's own proprietary fund family, they sometimes end up upstaging the bank's in- house offerings, which sometimes lack a long track record or brand-name recognition.

PNC has $1.7 billion in its Vested Interest 401(k) plans but Mr. Garlock said sales last year were flat.

He wouldn't disclose 1995 sales figures, but said that he hopes the additional funds will boost the banking company's 401(k) assets under management by between $500 million and $750 million this year.

And banks aren't the only institutions interested in creating these alliances.

Mutual fund companies are also profiting from arrangements with banks, according to John J. Mulligan, president of Retirement Plan Services, a pension consulting firm in Braintree, Mass.

Fund companies will typically pay a bank a mere 25 basis points of the assets it gathers through its 401(k) plan, he said. For that, the companies receive a new marketing outlet for their funds and the additional fees that come from the increased assets.

"It's really worth it to us, because we see banks as a great distribution outlet," said Lars O. Soderberg, vice president and director of Janus' retirement plan division.

He added that "we don't have an internal record keeping capability, and we need to be a part of other programs if we want to participate in the growing 401(k) world."

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