Q: How do annuities fit into your overall investment products program ?

Annuities stepped into the spotlight last year as mutual fund sales plummeted.

Many bank brokerage executives said sales of the tax-deferred investment products exceeded mutual fund volume for the first time ever.

But will annuities ever be an easy sell? Many states continue to restrict sales and mutual funds are showing signs of reemerging as the market rebounds.

With this in mind, freelance reporter Jeanne Iida asked bank brokerage heads what they expect from annuities for their banks and their customers.

How do annuities fit into your overall investment products program?

*** CHARLES E. RICE VP/director of sales Firstar Illinois Firstar Bank Milwaukee

Annuities are part of a big shift in emphasis we've seen from customers. Mutual funds went through a huge expansion in the past few years. But in the last quarter of 1994, and the first part of this year, we saw a correction in the market for mutual funds.

As a result, sales of annuities picked up. Customers - dissatisfied with the equity and bond markets - came in and demanded annuities.

For the bank, annuities are more profitable than mutual funds because the products offer higher commissions. But we don't promote one product over another. In both cases, we focus on defining customer needs.

Mutual fund sales are now higher - the markets are back. As a result, this year we expect mutual funds to account for about 60% of our investment product sales, and annuities to account for the rest.

But annuities are here to stay. MARK E. STEVENS VP/financial services F&M Services Farmers and Merchants Bank Salisbury, N.C.

Customer interest in annuities has recently picked up. Around this time of year, tax savings becomes an attractive idea. Annuities, which are tax- deferred, come to mind. Customers, after being shell-shocked last year with bond funds or flat equity performance, want to see some kind of performance. They may feel annuities can offer that.

The products assist our customers and are also profitable for us. Annuities offer better up-front commissions than mutual funds. But long term, mutual funds have a greater impact because of ongoing fees.

We have sold about as many mutual funds as annuities. That's probably because we try to focus our customers' portfolios on diversity. If they're lacking in long-term investments, we'll suggest something in fixed annuities.

Overall, we don't have a defined strategy for selling mutual funds or annuities. That lets us focus on customers' needs. Products come and go, but clients always have financial needs. GERALD A. LIENHART Financial consultant First Busey Securities First Busey Bank Bloomington, Ill.

Annuities are an appropriate financial tool to use as part of the investment product mix. The fixed annuity is most frequently the product of choice for the more conservative, fixed-income client.

The variable annuity is also a popular choice. This is especially true as customers become more comfortable with mutual funds, because the performance of variable annuities is linked to underlying mutual funds.

Annuities can be easier to sell than mutual funds. The fixed annuity over the past few months has been easier to recommend to my customers, especially when the investment markets weren't performing.

But, as interest rates have modified or declined, relative to the past several months, fixed annuities have become more difficult to sell. NED WAGNER Vice president Chittenden Investment Services Chittenden Bank Burlington, Vt.

In Vermont, we're not allowed to sell annuities, although I expect that to change with the recent Supreme Court decision that deemed annuities as investment products, not insurance products.

That's good news for the bank and our customers because annuities are an important side of the investment products business.

I certainly wouldn't present annuities in lieu of mutual funds. Instead, annuities would complement our other offerings.

On the variable side, I'd look for clients who are seeking a source of education funding down the road, or who are planning for retirement.

On the fixed side, I'd look for clients who are income-oriented, close to retirement, and looking for a steady income stream.

I believe annuities are very profitable from a bank standpoint because the bank earns commissions from product sales. THOMAS NORWOOD Executive VP, chief financial officer Gateway Investment Services Fidelity Federal Bank Glendale, Calif.

We see annuities as part of our retail banking program, not as part of a specialized investment products program. We sell all our products from an integrated-platform system in the branches of Fidelity Federal. In other words, we don't have a program of representatives dedicated only to selling investment products.

We see an annuity as a more conservative product than a mutual fund. Annuities serve primarily as tax-deferred savings products, rather than growth products.

Over the last three or four months, annuities have been more popular than mutual funds, but that probably will change over the coming months because of stronger markets.

Our sales strategy is to make sure customers have a clear understanding of what they're buying. We have the same disclosure requirements whether we're selling annuities or mutual funds; it's no easier to sell one than the other.

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