The ink isn't dry yet on the merger agreement between Wells Fargo & Co. and First Interstate Bancorp, but already the companies' investment businesses are feeling the impact.

Los Angeles-based First Interstate has shelved plans to launch four new mutual fund portfolios. The company had planned to have the funds up and running by March 31.

A spokeswoman for First Interstate confirmed that the expansion plans were put on hold earlier this week, when Interstate reached a definitive agreement to be acquired by Wells Fargo.

The move comes only three months after First Interstate combined its two fund families - the Westcore and Pacifica funds - under the Pacifica name, and moved their management to its First Interstate Capital Management unit in Scottsdale, Ariz.

"They had brought it all together and were really gathering up steam to sell the Pacifica Funds, which had never really gotten much play outside of California," said a First Interstate executive, who asked that his name not be used.

On the other end of the state, however, sources say San Francisco-based Wells Fargo is preparing to eventually merge First Interstate's investment program with its own.

Last month, Wells began a search for a new brokerage chief to take charge of its 225 brokers. Sources said the candidate will likely oversee the 210 investment representatives at First Interstate and could displace First Interstate's current brokerage chief, who has held the job for only four months.

The merger has also given Wells a compelling reason to revamp its well- regarded investment sales program, which has sputtered in recent months, industry sources said.

Wells is considered a model among banks in the investment business because of its aggressive style and high sales volume. But observers said it hasn't been especially nimble in responding to changing demands from customers.

In particular, sources said, the bank's brokers were slow to switch from pitching annuities to pushing stock funds, which gained in popularity last year as stock values rose.

Indeed, the company is expected to report that its earnings from investment sales were flat last year, according to Andrew Singer, president of Bank Insurance Market Research Group, Mamaroneck, N.Y.

Mr. Singer said that call report data for the first nine months of 1995 - the latest figures available - show Wells Fargo earned $76 million from sales of mutual funds and annuities, placing it behind BankAmerica Corp. and Mellon Bank Corp. Given those figures, he said, Wells is unlikely to top or even match 1994's investment earnings, which totaled $113.6 million.

Last month, sources said, the bank signaled its concerns about flagging sales by putting the branch-based brokers under the supervision of vice chairman Clyde W. Ostler. He oversees Wells' investment group, a broad portfolio that includes the bank's private banking, insurance, securities, and savings and investments businesses.

"Wells' branch-based brokers are definitely at a crossroads, and the bank realizes that the program needs someone to fine tune it," said a former Wells Fargo executive, who requested anonymity.

Sources said Mr. Ostler is searching for an executive to run the brokerage sales force, which previously had been under the purview of Elizabeth A. Evans, an executive vice president. Ms. Evans, who reports to Mr. Ostler, oversees Wells' savings and investments business.

Neither Mr. Ostler nor Ms. Evans were available for comment. A Wells Fargo spokeswoman said she could not confirm any changes nor verify that an executive search was on.

Industry experts say Wells seems to be doing what it must to lay the groundwork for a merger of the two companies' investment businesses.

"One of the worst situations that banks merging can have is a lack of clarity about who is in charge or where their business is going," said David Master, a consultant with the Optima Group, Fairfield, Conn.

He added that "the management agenda is getting a consistent program from one end of the organization to another, and many times it's easier to bring in an outside person to do that."

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