One of the first items on Michael Lane's agenda is negotiating a peace treaty between TIAA-CREF and the financial planners they've been feuding with for years.
"In the past, TIAA-CREF was seen by advisers as the enemy," acknowledges Lane, director of the pension fund giant's newly created advisory services division. The reason? TIAA-CREF employees only saw advisers when the time came for client money to be withdrawn, often to be placed in inferior -- and even unnecessary -- investment vehicles, Lane said. As a result, TIAA-CREF employees grew disdainful of the planning community, while planners came to think of the firm as difficult to work with.
For years, neither faction really needed the other, but things began to change in 1997, when TIAA-CREF began offering financial products to the public after losing tax-exempt status for its pension programs. Rather than watch client money walk out the door, the firm decided it would make more sense to team up with advisers and roll pension money into in-house investment options. "We realized that a partnering relationship would be better all around," Lane said.
To reach that goal, the firm launched a two-year initiative of talking with advisers, attending industry conferences and hosting focus groups. "What weve found so far is that there is a high familiarity with TIAA-CREF's retirement business, but a low familiarity among advisers on the investment and insurance products created for use by consumers," Lane said. "What we want to do is raise awareness so that when the time comes for the [pension plan] participant to retire, those assets are rolled into one of our investment products rather than pulled out."
The strategy is already enjoying some success. TIAA-CREF attracts roughly $10 billion a year in new assets, Lane said, and less than $2 billion a year leaves, for a net growth of $8 billion annually. But there's plenty of room for growth in the adviser channel. Of TIAA-CREF's $300 billion in assets under management, only about $1 billion has come from advisers.
"There's a tremendous amount of support for this initiative, but there's still a lot of work to do," Lane said. "The hard part is convincing the skeptics, proving that we can partner with advisers."
At the moment, TIAA-CREF is looking for advisers who qualify. "There's something like 400,000 planners out there, but only a very small, exclusive group will qualify -- maybe 10% will even qualify to partner with us," Lane said. "We're not looking at the guys selling fixed annuities with a 10% commission; that will never be our market."
So, who is the right type of adviser? "It's someone who's consumer-oriented vs. product-oriented," he said, "someone who always has the consumer's best interest in mind."
TIAA-CREF's new investment advisory division will be built and housed in Louisville, Ky. (Lane's hometown). The division currently employs 10 people, and Lane says that figure will double in the next 12 to 18 months. Plus, "we have additional mutual funds coming out," he said, "and additional subaccounts for our annuities."
The main thing, though, is to provide the services that advisers need to grow their businesses. "We are building a service and support group to help advisers," Lane said. "We can provide research, answer questions and be a complete back office, from a support perspective. We want to show that we don't just have a great family of financial products, but also a dedicated support and service team to help advisers and to support their marketing efforts."
The latter point should be easy. Despite the unwieldy name, TIAA-CREF already has high name recognition- -- and respect -- among the general public. In fact, according to a Harris Interactive poll published earlier this year, only USAA enjoys a better reputation in the financial services industry than TIAA-CREF.
Will financial planners come to regard TIAA-CREF as highly as the general public does? Lane is convinced they will. "Forget the past," he urges advisers. "If you're truly interested in doing what's right for consumers, then we have something to offer in just about every category. We want advisers to understand that, from now on, things are going to be different. It's going to take time, we realize that, but we're dedicated to putting that time in."