Bank mutual fund complexes will either have to grow through acquisitions or carve out a distinct marketing advantage if they plan to survive the coming shakeout, a leading financial services consultant says.

"Being a winner will be difficult," cautioned Jeffrey F. Peters, a Boston-based consultant with McKinsey & Co., in remarks to the regional meeting of the National Investment Company Service Association.

Mr. Peters contends that "polarization" in the fund industry is taking place between the largest five or 10 players and the dozens of smaller companies, including bank programs.

The larger funds companies - particularly the top five or so - are drawing a disproportionate share of retirement savings and inheritance dollars, largely because of they are already big operations.

Those attributes include brand recognition and distribution and technological capabilities that cause them to be favored by large sponsors of retirement plans.

Dreyfus Corp., Mellon Bank Corp.'s fund subsidiary, is the only bank fund program among the top 10 mutual fund programs. It's the eighth-largest fund program in the country, with $75 billion in assets as of December.

"Retirement dollars are definitely driving flows and that tends to favor the larger companies," said Mr. Peters, a senior member of McKinsey's financial institutions practice.

For banks to become profitable over the long term in such an environment, Mr. Peters said, they will have to begin biting the bullet and acquiring smaller fund complexes in order to gain scale. Or they will have to "stand out from the crowd" by offering what he calls a "distinctive value proposition."

One such proposition is "being the integrated solution to all your financial needs." Banks such as Wells Fargo and NationsBank are succeeding in this area, he said.

He said that bank fund programs could be doing a more effective job of tapping into the rest of the bank's client base.

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