Company sees promise in 401(k) consultingInvestment...

BANKING & FINANCE

August 12, 1993|By David Conn | David Conn,Staff Writer

Company sees promise in 401(k) consulting

Investment experts consider it nothing less than a tragedy that so many employees in their 20s, 30s and 40s put their 401(k) money into low-earning, relatively risk-free investments.

"You've got all these people out there sticking all their money into money market mutual funds because they're scared to death of losing their retirement savings," says John R. Hill, a member of the newly formed Pinnacle Advisory Group L.C. in Columbia.

So Pinnacle has started the 401(k) Employee Advisory Service. The program provides individual counseling to company employees, explaining their 401(k) options.

Pinnacle, a three-person team, is using its own financial advisers and "renting" independent, fee-only financial planners as consultants. The cost, for an initial group meeting with employees, and then hourlong individual sessions, is $95 per employee.

Why would an employer pay for this service, other than pure altruism? Mr. Hill points out that if too few rank-and-file employees participate in a plan, regulations could limit the amount that the most highly paid executives can contribute toward their retirement.

Another reason: A law that takes effect Jan. 1 will offer employers protection from liability for poor performance on their 401(k)s -- as long as the employer fulfills certain obligations, including providing sufficient information to employees.

With one project under its belt -- the Dixie Printing and Packaging Co. in Glen Burnie -- and several more on the way, Mr. Hill is thinking big. "If we can make this thing work locally, then there's no reason in the world why we can't take it national."

Bank consultant gazes into his crystal ball

Last summer, Rockville banking consultant Arnold Danielson wrote a report predicting that NationsBank Corp. would make a "major acquisition in Florida or Maryland," and that First Union Corp., also of Charlotte, N.C., "can be expected to head north."

Blind luck? Maybe. But serious banking handicappers would do well to pay attention to Mr. Danielson's just-released report on the Southern banking market. During the next decade, he predicts:

* Wachovia Corp. of Winston-Salem, N.C., tired of sitting on the sidelines, could buy a mid-sized Virginia bank, such as Crestar, Signet, Central Fidelity or First Virginia.

* One of those survivors, or maybe Mercantile or First Maryland in Baltimore, will "reach for the stars" by going after either a second-tier North Carolina bank, or a midsized Virginia institution.

* The trend toward acquiring healthy thrifts "will accelerate and hasten the downward flow of thrift market share."

This is pure speculation, Mr.Danielson notes. But remember, you heard it here first.

Md. thrifts improve, but progress is scant

The fortunes of Maryland's thrift industry may be improving, but not by a whole lot.

That disheartening conclusion can be drawn from the first-quarter national rankings of savings and loans from Sheshunoff Information Services Inc. in Austin, Texas.

For instance, the average U.S. savings and loan's return on assets, a key measure of profitability, climbed to 0.52 percent in the first quarter. A year earlier, it was 0.43 percent.

In Maryland, however, the good news wasn't so good.

Return on assets climbed into the black in the first quarter, from a negative 0.01 percent a year earlier. But the state's average 0.24 percent ROA was less than half the national average.

That made Maryland 11th worst in the nation, compared with 13th worst a year ago.

The main drag on the local thrifts' earnings improvement was the fact that two of Maryland's four largest S&Ls -- Standard Federal Savings Bank and Second National Federal Savings Bank -- were seized by the federal government last year and placed into Resolution Trust Corp. receivership.

The upside, such as it is, was that almost 89 percent of the state's thrifts remained profitable in the first quarter, about the same as a year ago.

Analyst's new job completes hat trick

R. Hutchings "Hutch" Vernon is completing a "hat trick" of Baltimore investment houses this month. The former Legg Mason Inc. analyst will be moving from T. Rowe Price Associates Inc. to an affiliate of Alex. Brown Inc.

Mr. Vernon has been a member of T. Rowe's investment counsel group since 1990, advising mostly wealthy individual clients.

He'll become part of the small team at Alex. Brown Investment Management, the investment advisory unit that is part-owned by Alex. Brown Inc.

Mr. Vernon, 33, achieved some measure of stock-picking fame by being named one of Institutional Investor magazine's "home run hitters" in 1989 for touting Best Products Inc., the Richmond, Va.-based catalog showroom retailer.

Detecting a nascent turnaround, Mr. Vernon recommended Best before its stock went on a run that also was fueled by a takeover bidding war. Before Best was purchased by a New York investment group, the stock rose 260 percent. (Of course, after the leveraged buyout, Best was nearly crushed by its debt load, and filed for bankruptcy protection in January 1991.)

"I was very happy at T. Rowe Price," Mr. Vernon said. But Alex. Brown Investment Management is "a great opportunity for me."

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