The 401(k) market has become one of the hottest areas for asset growth in the investment industry.

The number of participants in these and related plans where money is deducted from paychecks and invested tax-free until withdrawal at retirement have soared from 15% of all workers in 1988 to nearly a quarter last year, according to the Employee Benefits Research Institute, Washington.

Over the past decade, assets in these plans have nearly quadrupled to just over a trillion dollars.

The popularity of these plans is forcing more and more people to become their own investment managers. In essence, individuals are taking over much of the retirement planning that traditionally was handled by professional pension fund managers.

The boom has also created a big, but competitive new market that both banks and nonbanks covet.

One niche entails the administration of these plans. About a fifth of all banks with more than $50 million of assets compete in this business against a strong line-up of nonbanks, according to American Brokerage Consultants, St. Petersburg, Fla.

Even bigger profits can be had by funneling 401(k) money into proprietary mutual funds and trust funds. This is also an area where both bank and nonbank investment advisers vigorously compete.

The growth in 401(k) assets represents both an opportunity and an obligation.

Participants want a broader variety of investment choices. They want the ability to switch investment choices with relative frequency. They also like to be able to monitor the performance of their investments. These are all things that weren't applicable in a traditional pension plan environment.

One other aspect is the need for education. There is a risk that many investors will not be financially secure at retirement because of some of the choices they might be making today.

We think the way we are tackling the market [with sales support from Essex Corp.] will generate substantially more assets for us.

Initially, the 401 (k) business is not a great .money maker. It's a matter of building up distribution now, so that in five years it can be a significant contributor to our bottom line.

The qualified plan business in general will become a bigger pan of banks' investment businesses. The mutual fund companies have been very successful at it, and I think you will see banks getting into it too. lt's a natural evolution.

Retirement planning fits right in with what we're about. To maintain a good relationship with our customers, lt's important to offer as many services as we can.

The 401(k) is a cornerstone product for banks. It gives you a chance to work with affluent executives and their employees,It and a chance to provide for their banking and retirement needs.

Many companies have come out with daily-valuation retirement products. What you've got now are a lot of players and I'm sure that in two or three years there will be a contraction in the industry.

We've spent the last few years really been going after the 401 (k) market.

This is another way for us to distribute our mutual funds and other investment products. And it's a good thing for participants, because they can select products that best suit their needs.

We use our own Star Funds, and also a guaranteed investment contract fund. We're adding services, like a voice system that people can use to call in and check their balances and make changes in their portfolios. The program is doing great, and our assets continue to grow.

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