MUTUAL FUNDS WANT MORE BANK FOR THEIR BUCK: FIDELITY, FRANKLIN, OTHERS HAVE FILED THRIFT CHARTERS

Imagine your mutual fund company hounding you at the office after you missed a couple of student loan payments.

That may sound far-fetched, but it could soon become a reality. Industry giants Fidelity Investments and Franklin Resources Inc. have joined the parade of financial services companies seeking to launch federally chartered thrifts.

The applications join some 44 other non-bank filings, about half of them from insurers, pending before the Office of Thrift Supervision.

In effect, companies of all stripes are making an end run around federal banking laws that prohibit them from offering such services. While insurers have been most active, filing for thrift charters since late 1996, a hodgepodge of companies are joining the fray: from Hillenbrand Industries Inc., a coffin and funeral urn manufacturer in Batesville, Ind., to agribusiness giant Archer Daniels Midland Co.

Under recently broadened laws, thrifts can offer everything from education, small business and consumer loans to credit cards and trust services — as well as the usual savings accounts and home mortgages.

“We’ve had a market where most firms have focused their strategies on the asset accumulation phase — trying to capture people who need to save more for retirement,” says consultant Darlene DeRemer of DeRemer & Associates in Wrentham,

Mass.Fido, Franklin. T.Rowe turn thrifty

“If you look at the demographics of the American consumer, there is this enormous need to help people with post-retirement longevity planning and risk management.” she says. “This is a way to extend customer relationships and help with wealth transfer issues.”

Like most of the insurance company applicants, Fidelity is seeking limited thrift powers to offer personal trust services to its 14.4 million U.S. customers. All the business plans filed by these companies can be changed after three years.

Fidelity’s new business — Fidelity Personal Trust Co. — would be run by senior vice president James Cornell in Boston and wouldn’t make loans or accept deposits.

The country’s biggest mutual fund sponsor — with $716 billion under management through November — already provides similar trust services through two state-chartered trust companies in Massachusetts and California. These units serve Fidelity customers in more than 20 states through reciprocity agreements.

A federal charter would allow Fidelity to expand its estate planning services to all 50 states through trust officers in its more than 75 offices, which it calls investor centers, as well as through phone centers and the Internet.

“We will provide a full range of services and the opportunity for all customers to interact with us as they deem appropriate,” says a company spokesman.

In contrast, Jennifer Bolt, a vice president at Franklin Resources — which managed $223 billion through November and sells its mutual funds through intermediaries — says the company doesn’t plan to offer personal trust services since brokers, financial planners and other sellers might view the move as a competitive threat.

Instead, it is seeking a more flexible charter for a California-chartered bank acquired in 1985. The unit, now operating as Franklin Bank, has $100 million in assets, mostly in credit card and auto loans, and is based at the fund company’s San Mateo, Calif., headquarters.

In its Dec. 31 application, the company is seeking to form Franklin Templeton Bank and Trust, a federal savings bank based in Salt Lake City. The move would allow Franklin to take advantage of Utah’s higher caps for late payment fees and other credit card charges. The California operation would become a branch.

Converting Franklin Bank to a federal thrift charter would allow it to expand consumer lending nationwide, with a broader line including trust services. But Ms. Bolt, who heads banking and finance operations, says Franklin has no near-term plans to expand beyond credit cards and auto loans.

“The thrift structure is more flexible, and who knows if the window may be closed on these?” she adds, alluding to a move in Congress last year to cease the issuance of thrift charters.

The thrift application filed last October by T. Rowe Price Associates Inc. represents the fund industry’s most direct assault on savings accounts, which banks use for cheap capital to make loans. The Baltimore company’s proposed T. Rowe Price Savings Bank would offer federally insured savings accounts to its nationwide customer base.

Kirk Joy, assistant to the director of investment services, says the company plans to sell certificates of deposit over the telephone and through the mail but for now has no plans to make loans or offer personal trust services.

T. Rowe Price also operates a Maryland-chartered trust bank that serves as a custodian for 401(k) and other retirement plans and manages more than $47 billion in common trust funds.

All three fund companies say they hope to have their thrifts up and running by yearend. The Office of Thrift Supervision isn’t slated to act on the Franklin and Fidelity applications until March 31 and April 5, respectively.