Wells Fargo Rolling out Asset-Allocation Account

By Crockett, Barton | American Banker, January 6, 1995 | Go to article overview
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Wells Fargo Rolling out Asset-Allocation Account


Crockett, Barton, American Banker


Wells Fargo & Co. this month is joining the handful of companies offering brokerage accounts that diversify assets among a range of mutual funds.

Such asset-allocation services, known as mutual fund wrap accounts. have been around for more than a decade, but became hot sellers just last year.

Wrap accounts now are available from more than a dozen companies, including Merrill Lynch & Co., Smith Barney, and brokerage affiliates Vermont's Chittenden Bank, Pittsburgh's PNC Bank Corp., and the California thrift Great Western Financial Corp., according to Cerulli Associates Inc., a Boston consulting firm.

Assets in these accounts grew by nearly 50% last year, to $12.3 billion, according to Cerulli.

Mary McAvity, a consultant with Cerulli, said that Wells' introduction of a wrap account was a smart move. given the product's growing popularity.

"We think it is a very good strategic move." she said.

She added, however, that wrap accounts are difficult to launch because the computer and trade-execution systems can be complicated to run and can cost $1 million to $2 million to build.

Cerulli is not an uninterested party. It advises companies on investment marketing strategies, and counts Wells as one of its biggest clients.

But Kenneth R. Hoffman, president of the consulting firm Optima Group Inc. in Milford, Conn., agreed that Wells was wise to start selling mutual fund wrap accounts through the retail brokers that work in its branch network.

He added that at least 10 other banks are planning to make similar launches, or to sell mutual fund wrap accounts managed by other firms, such as Fidelity Investments.

Mr. Hoffman noted that banks have sold mutual fund wrap accounts through their trust departments for years.

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