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Insurance, credit-card firms tap the mutual fund market

By Sharon ReierSpecial to The Christian Science Monitor / February 2, 1982



New York

Item: In Ohio, Pennsylvania, Texas, and upper New York State people who have recently received the proceeds of a Prudential insurance policy may expect a call from their Pru insurance agent, suggesting the funds be parked, at least temporarily, in one of the eight mutual funds that will be offered by the giant insurance firm starting in April. The mutual funds, established with the help of Bache Halsey Stuart Shields, will be expanded gradually into other states.

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Item: People dealing with the 30,000 stockbrokers who sell mutual funds managed by Massachusetts Financial Services (including brokers from Merrill Lynch, Paine Webber, and Baltimore-based Alex Brown & Co.) will soon find their brokers offering universal life and variable annuity insurance policies. They have been developed jointly by Sun Life of Canada and MFS. The two companies expect to tie the merger knot in May.

Item: Next month the 9.5 million holders of the American Express green card will find among the sundry mail-order pitches they normally receive with their billing a column about investing. It will be a monthly feature contributed to Amex's newsletter by Shearson Loeb Rhoades, American Express's year-old partner in the financial supermarket game.

Item: Before the tax man cometh in April, 40 million or so Sears credit card customers and former customers will probably receive a mail-order pitch to establish individual retirement accounts through Dean Witter Reynolds, one of the two financial institutions Sears recently acquired. The other, Coldwell Banker, is a major real estate operator.

But appealing to the diverse emotions that cause people to buy insurance and buy investment products is not a simple process. The newly formed financial services giants are not approaching the problem lightly. Each plans a different market strategy.

''The transition will not be easy,'' predicts Martin Vogt, vice-president in charge of investment products at the Prudential Insurance Company of America, which insures some 35 million individuals. ''It is not an easy transition for an insurance agent to sell an equity type of investment. That is why we are getting into the mutual funds business first. With some of our new funds, you really need an agent to explain them. I defy you to read the prospectus.''

Besides three money market funds, the Pru will offer a stock fund, an income fund, an options fund, a tax-free income fund and a tax-managed utilities fund. Mr. Vogt refers to the last as an ''Alice in Wonderland type of arrangement'' where buyers get no income but get practically tax-free benefits when they sell their shares.

Mr. Vogt maintains that the cross-marketing move will be ''an evolutionary process, not a revolutionary one. I think the process will take more time than we estimated.'' As of now, only 8,000 of Pru's 28,000 agency force are trained to security dealer specification. Another 4,000, he says, have already volunteered to take the 40 or 50 hours of training necessary. But the Bache account executives, who already are marketing some of these funds, will not be in the vanguard of this cross-marketing effort.

Massachusetts Financial Services is taking the opposite tack. It will begin selling insurance through the 30,000 broker dealers who market its 12 mutual funds. MFS manages some $5 billion in its corporate and institutional accounts and mutual funds, says MFS president and managing partner Richard B. Bailey: ''The traditional insurance agent for years and years was selling ordinary life insurance and saying, 'Look out for those nasty equities because they go up and down. Look out for bonds because they go down too. What you really want is something that is guaranteed so your family will be taken care of in case of catastrophe.' Suddenly they are selling variable annuities that are based on stocks and bonds. It is difficult to make that 180-degree switch.''

However, since MFS agents have been selling stocks and bonds for years, and have sold mutual funds employing those same instruments, selling the new universal life and variable annuities devised by Sun Life and MFS should not be too difficult.