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Bank of Montreal Ups U.S. Fund Ante


Bank of Montreal's acquisition last week of the North American operations of online broker CSFBdirect is part of an effort to ramp up the Canadian bank's U.S. mutual fund sales, the company said last week.

Currently, Bank of Montreal offers 21 proprietary mutual funds in the U.S. through its U.S. subsidiary, Harris Investor Line, a full-service broker that oversees US$18 billion in assets. Those funds are distributed through broker/dealers and financial advisers. The Harris unit also acts as a supermarket, offering some 5,000 non-proprietary funds.

With the acquisition of CSFBdirect, Bank of Montreal now ranks seventh in size among North American online brokers and has a total of 850,000 active trading accounts, said Ian Blair, a Bank of Montreal spokesman. The firm had not yet broken down how many of those accounts include mutual funds, but he said the number is "substantial."

The firm's plan in buying CSFBdirect at a cost of US$520 million was to increase the size of its U.S. wealth-management business, Blair said, and mutual fund sales will be a key component of the strategy. "It's a piece of the wealth management pie," he said.

Its client base for CSFBdirect is one of the fastest growing areas in the states and this is a big step forward for us in that strategy."

Converting From Clicks

To Bricks

After the deal closes in February, Bank of Montreal intends to re-brand the CSFBdirect operation and call it Harris Direct Investing. The firm will convert nine walk-in branches it acquired in the deal to full-service financial services shops. When Bank of Montreal is done converting them, clients will be able to get basic banking services, estate planning and retail investing in all sorts of investment products, including mutual funds. The walk-in branches are located in New York City, Chicago, Atlanta, Philadelphia, San Francisco, Dallas, Jersey City and Boca Raton, Fla.

The CSFBdirect deal is the latest in a spate of U.S. acquisitions by Bank of Montreal in the last two years. The firm bought wealth manager Burke Christensen Lewis in September, 1999. Then in February 2000, it bought Village Bank of Naples in Florida, followed by Seattle-based wealth manager Freeman Welwood that June. That deal was followed by the acquisition of First National Bank of Joliette and, earlier this year, Century Bank.

Fund Business Key to Growth

Bank of Montreal plans to grow the new wealth-management unit by 15% a year, with much of the sales coming from mutual funds. "I can't quantify it for you, but the mutual fund group is a large trunk of the private client group," Blair said.

CSFBdirect currently offers more than 10,000 mutual funds to its investors. Bank of Montreal will continue to offer all of these funds. To be sure, much is unclear about how that strategy will be executed--especially considering that terms of the deal have not been disclosed.

It is unclear what sort of fees CSFBdirect will charge its investors. CSFBdirect had offered its Credit Suisse Warburg Pincus funds to CSFBdirect investors at no transaction charge. That arrangement will evaporate, Blair said, and it is unclear whether similar deals will be put in its place.