HOUSTON -- Carolyn Kling doesn't use just one airline to rack up frequent-flier miles. She uses all of them.

When a person flies 200,000 miles a year as she does in her job as president of the financial institutions division of Transamerica Fund Management Co., she has enough frequent-flier miles to go anywhere she wants on any airline.

"The typical bank investment rep is like the bank customer, and they like to be coddled,; said Ms. Kling. "They want attention. We are very good at providing attention through educational training. We act as their marketing department."

Ms. Kling crisscrosses the country talking to banks that sell the Transamerica Funds, with $2.9 billion in 19 portfolios. Of the 200 or so banks that sell the funds, she tries to visit 60 to 100 a year.

A Push into Banks

All this is part of Transamerica's recent push into the bank marketplace. The effort began in April 1991 when Carrol McGinnis, the executive vice president in charge of the financial institutions division, hired Ms. Kling. She, in turn, hired five regional wholesalers and an equal number of sales support staff. Adding other staff brings the bank division total to 20, with most of those in Houston.

San Francisco-based Transamerica entered the mutual fund business in 1989 when it purchased the Houston-based mutual fund management group that managed the Criterion Funds.

Thomas Powers, who had been with the company since 1966, bought controlling shares in 1976 and sold to Transamerica in 1989. He continues as chairman and chief executive officer of the management subsidiary, which itself continues on in Houston.

Mr. Powers, 55, sits on influential industry boards, including the National Association of Securities Dealers board of governors and the executive council of the Investment Company Institute. While serving as president of the ICI several years ago, Mr. Powers commissioned studies on possible distribution channels for mutual funds, and banks came up.

"One of the things that came out of the investor profiles on when they bought their mutual funds was financial institutions, over and over again," recalls Mr. Powers. "We started to realized investors were getting introduced to mutual funds through the bank market."

Transamerica also noticed that more banks and insurers, such as Kemper Financial Services Inc., were getting into the business. Mr. McGinnis, a longtime Criterion employee and former fund manager who switched to the sales side, was instrumental in the decision to start a bank dedicated sales effort.

"Kemper was among the early ones in the bank channel; Putnam, Massachusetts Financial Services were clearly there. These were some significant players. It was a combination of their involvement and our actual impressions in the field and the ICI staff findings. We reached the conclusion we should be involved," Mr. McGinnis said.

Special Treatment

He soon discovered banks had to be treated differently than brokerage houses, insurance agents, and financial planners. Banks wanted conservative products and more training than normal. So he hired Ms. Kling, a veteran of bank mutual fund sales efforts at Putnam Financial Co. and Continental Insurance Corp. As she did with those companies, Ms. Kling works out of her San Diego home.

Transamerica initially concentrated on building sales agreements in California banks. "It's the world's largest mutual fund market," Mr. McGinnis notes. Because of the name recognition, sales went well. Today, Transamerica bank wholesalers are in New York, Tampa, Houston, San Diego, Los Angeles, and San Francisco.

From virtually no bank sales before the program was instituted, bank sales constitute 15% of all new sales for Transamerica Funds. Mr. McGinnis believes that number can reach as high as 50% within five years.

To support that effort, he would like to have wholesalers in the Pacific Northwest, the Middle Atlantic, and Upper Midwest within two years.

Transamerica will use two key areas to push sales, executives say. One is the continued emphasis on training. Part of that is the hunger by banks for general information on the basics: "How to Buy a Bond Fund" is an example of the kind of information Transamerica finds great demand for from banks.

The other emphasis, Mr. Powers says, is on developing new products for bank customers.

Transamerica is working on a number of different hybrid products that will appeal to bank customers. Though nothing specific has been identified, Mr. Powers says the new generation of products will combine aspects of insurance products, such as annuities; bank products, such as CDs; and stocks, as in equity funds.

The idea is to have a closed pool of money that can only be accessed one a year, possibly use hedges and other fixed-income techniques and include elements of equity mutual funds.

"We're trying to position ourselves as mutual funds, developing new types of products that are better suited for the financial institutions marketplace," Mr. Powers said.

"The marriage of insurance, banking, and mutual fund products is going to explode over the next decade. Transamerica's committed to this business. They're going to grow it, and as long as I have any say-so in it, I'm going to continue this R&D. Whether it's two years down the road or next year, they're [hybrid products] coming."

Trend to Diversification

All of which should make Ms. Kling's job easier. As a former certified financial planner, she was trained to diversify her clients' assets. Banks, she said, are finally catching on to diversification and selling more than just bond and muni funds. Because banks tend to be followers instead of leaders, she said, they have been behind in getting into growth and equity fund sales.

"Now we're seeing more international funds being added. A couple of years ago, a financial institution would not have sold an equity fund. Now they want to look at them. They're including emerging growth funds as part of their very short list."

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