Why sell mutual funds? More banks citing fee income; 19% of CEOs polled got into the business for fee income; 30% say it's why they're in it now.

Bankers are increasingly viewing investment products as a money-making business in its own right, not just a way to retain customers.

That's the key finding of a survey of 205 bank chief executives by Dalbar Financial Services, Boston.

While nearly half of the respondents said they got into the business mainly to retain customers, only 36% said that customer retention was still their top priority.

Some 30% of the bankers said they are now in the business to boost fee income, up from 19% who said that was the reason they got into the business.

"CEOs are now pushing the investment products business, rather Ihan being pulled into it," said Louis Harvey, president of Dalbar Financial Services.

"This study showed that there is a high degree of interest in investment products from the 'corner office,' and the interest is in fee income," Mr. Harvey said in a telephone interview.

Brokers, 'Watch Out'

The survey results, which Dalbar plans to release today, show that banks are continuing to broaden the services they offer.

Out of 50 banks with more $1 billion in deposits, more than a quarter have plans to operate full-service brokerage operations. And 13% of 150 banks of all sizes are going the full-servive route.

"Brokerage firms better watch out," Mr. Harvey warned.

Banks may also give insurance companies a run for the money, as they forge ahead with plans to introduce variable annuities.

These efforts come despite pending legal decisions on banks' rights to sell annunifies.

Among chief executives whose banks do not already offer proprietary variable annunities, nearly half said they plan to introduce the products.

And 47% out of 124 executives said they plan to provide variable annuities supplied by outside companies.

With banks becoming more aggressive in investment products, there is a "high probability of price wars among those that provide investment products and services to the banking community," Dalbar analysts wrote.

Outside Products

Although many banks arc offering proprietary mutual funds, banks that have their own funds have "universally accepted" products provided by outside companies, the analysts said.

Based on answers from 88 chief executives, a quarter said they planned to add other companies' mutual funds to their product line-ups.

And 30% out of 152 bankers said they plan to introduce proprietary mutual funds.

Dalbar mailed its survey to chief executives at the '1,000 largest banks and savings institutions, and tallied responses based on telephone interviews with 205 of these CEOs.

Not everyone responded to each question.

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