'Private labels' bring money fund buyers around to the banks

It may seem like the chicken asking the fox over for dinner, but some bankers are looking for ways to sell money market funds or fundlike products to their customers. The banks have apparently decided that it makes more sense to let some customers have their money funds and to keep them around for other bank services.

Some of these banks are finding space on their walls for posters promoting ''private label'' money funds managed by an outside firm. The funds would carry the bank's name in large type, with the fund manager appearing very inconspicuously, if at all.

The first of these private-label funds came recently from the Fidelity Management Group, a Boston mutual fund. Its American Money Market Fund was registered with the Securities and Exchange Commission this spring and is being marketed by banks in 13 Midwestern states.

Now, instead of taking their business out of the building, bankers hope, people will continue to come to them for financial advice, checking accounts, credit cards, and loans.

''The banks get the opportunity to continue to have customers around for services,'' said Donald Hill, project manager for the Fidelity program.

A customer coming into a bank offering the service will not see much of Fidelity's name, Mr. Hill said. ''Fidelity will play a very low-key role in the program.'' Instead, they will see signs advertising their bank's Financial Management Account (FMA).

If a customer opens one of these accounts, his money will be automatically ''swept'' into the money fund when the account balance goes above a ''target'' level set by the bank. Below the target, the money will earn the bank's standard interest rate for the NOW (negotiable order of withdrawal) account. Above the target, current money market fund rates will prevail.

In addition to the NOW account and the money fund, the FMA includes a bank line of credit, a debit card, and a securities account permitting customers to buy stocks through Fidelity's discount brokerage services. Mr. Hill says the brokerage account is similar to the Cash Management Account offered by Merrill Lynch, Pierce, Fenner & Smith Inc. and similar accounts being opened by other brokers. These accounts have grown quickly, attracting people interested in their automatic margin loans from the broker to pay for additional stock purchases, access to the account through checks or debit cards, and the continual sweep of cash into money market funds.

The difference with the FMA, Mr. Hill says, is that it permits customers to do all this with their own local bank instead of with a bank in a distant city or a brokerage firm. Customers can also get at their fund money through an automatic teller machine (ATM).

About 200 banks have signed up for FMA. Those banks belong to a 13-state organization known as MABSCO Financial Services Inc., with banks in Arkansas, Colorado, Illinois, Iowa, Kansas, Michigan, Minnesota, Missouri, Nebraska, North Dakota, Oklahoma, South Dakota, and Wisconsin.

The FMA is the second program Fidelity has helped launch to assist banks in tapping the money fund market. Working with MasterCard, Fidelity has also introduced the MasterCard Money Management Account, which combines a customer's checking account with a Fidelity money fund account. Both are accessible through the MarterCard charge card or the MasterCard II debit card. A customer could use one of the cards to get money fund cash through an ATM.

This account also has a target feature, paying money market rates on any balances above that level. Brokerage services and automatic transfers between the bank account and money fund are also included.

Unlike the FMA, which is initially limited to the 13 states in the MABSCO program, the MasterCard account is available at any bank offering this card which wants to participate.

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