In September, Tom Kolbe was named national sales manager of INVESCO after joining the firm in 1999 as its institutional sales manager. Kolbe's quick rise to the top is made more remarkable by the fact that he has just 10 years experience selling financial services. Prior to joining INVESCO, Kolbe sold fixed and variable annuties and life products for Protective Life Insurance in of Texas. His career path was leading him to the position of regional sales manager for the firm when he left to join INVESCO. Mutual Fund Market News caught up with Kolbe and discussed his new role and INVESCO's shift into the advisor channel. An edited version of his conversation with Andrew Greene follows.
MFMN: What about INVESCO prompted you to join in 1999?
Kolbe: The reason I chose to join INVESCO was three-fold: The tremendous strength of the AMVESCAP parent organization, the understanding that the future of the marketplace belonged to strong global entities that were in a position to create global partnerships for not only vertical selling but horizontal selling as well. The second part was I looked at brand growth and INVESCO seemed to be having tremendous brand growth and had strong brand recognition. They made a fundamental marketing shift into participation in the broker-dealer community, fee-based planning. That seemed to be a very important direction then and as it continues to grow today as well.
MFMN: That's interesting because that was a shift many no-load firms took in an effort to sell through intermediaries. How did INVESCO do that and how have those efforts gone?
Kolbe: I think a lot of credit has to go to Ray Cunningham (COO), Mark Williamson (CEO) and to Rich Healy (director of marketing)--individuals who joined INVESCO around 1998 and made the decision to shift our focus. I think they had, and continue to have, strong relationships with the broker-dealer community. At that point in time I think the distinction was blurring between load and no-load. When the emphasis became the move toward fee-based, the clients' emphasis shifted to, I'm paying the broker for advice, information and proper planning that will serve me in the long-term. Therefore, I'm also asking the broker to provide me with the best investment choices out there.' To the client, it no longer mattered if the origin was load or no-load, it was simply a matter of, Get me the best funds to meet my needs.'
MFMN: Things have changed since 1998. Obviously performance is not what it was and the markets have flip-flopped. Has that had any impact on INVESCO's strategy?
Kolbe: I think there are a couple of pertinent points to that. Number one, we've maintained excellent service and communication with all levels of the industry vis-a-vis information that can be distributed to clients. Our key accounts have done a fantastic job at the home office level to communicate on a timely basis what we're doing and how we're doing it. And the same thing is happening at a wholesale level. We continue to provide timely information to our brokers so they understand our processes.
Number two, we have certainly been perceived in the marketplace as a growth manager. What we have done as a firm is to say, It's very important for us to stick to our discipline of management. It has served us well over three, five, and 10 years. To abandon that to be just strictly an index fund and give up our ability to pick stocks is not our desire.'
So we've stayed very focused on what we do really well, which is identifying solid management and solid earnings, increasing revenue over time. And we believe that when the market turns towards growth investing that we will be rewarded to a larger degree than our competitors. We continue to spread the word throughout the community that we are a diverse management group capable of providing a strong value approach to management through our funds as well as our already perceived to be excellent growth funds. And of course we continue to have a niche in the sector market place and we continue to present our sectors as an important complement to an asset allocation model.
MFMN: In what sort of products do you see a lot of demand and what sort of products are you developing?
Kolbe: I think we continue to focus on those funds that we feel the market has a demand for. Obviously, the market continues to embrace value style funds so we continue to go out and promote and make the market aware of our ability in the value area. Inside INVESCO, our Dynamic mid-cap growth fund continues to be an attractive area.
Obviously, the biggest difficulty for the brokerage community is convincing clients to move away from a money market and start to invest their money in the marketplace right now. I think that prior to the very, very tragic events in New York, investors began to shy away from the marketplace. Unfortunately, [the attacks] made the situation that much worse and provided more uncertainty for the investor. So, our role really is to help the broker find ways to help the client appreciate that their long-term goals haven't disappeared and there is still a need to maintain some kind of an investment strategy and to continue along with their plans.
MFMN: Currently, in what channel are you having the most success in terms of sales?
Kolbe: We continue to have good strong growth in the wirehouse community and then also the financial planning community. We remain a strong partner with most of the broker-dealers and many of our funds remain on our partners' recommended lists. If you think about it, at the end of 2000 we were the sixth largest net seller of mutual funds and that was through the broker-dealer community and that occurred just through the wrap business. When you think about that against some of the loaded competition, that's a tremendous achievement for us.
But our broker community also asked us to come out with some product that could be sold at the loaded level. So, we've started to build out a loaded fund family, where we have a smaller number of offerings today than [what we] currently offer in the direct sale market.
MFMN: You've been instrumental in developing INVESCO's distribution through annuity products. What have you done to jump-start those efforts?
Kolbe: When I was asked to come in June of 2000 to spearhead this particular channel, we had approximately six or seven relationships, American Skandia being our primary one. Clearly, we felt that we had an opportunity to position our funds inside other insurance carriers.
So we went out and approached other insurance carriers with a five-point plan. And that is, we clearly had funds that could fill voids in their product and at that time it was driven by sector play and overlay, what we alluded to before. The second was brand growth; the third thing was the momentum of the firm, the fourth was the service we provide institutional wholesalers. We would support their efforts to drive assets into their product at a higher level than anybody else in the industry - that was our commitment to them. And finally, of course, there was synergy of distribution. We had established ourselves as a very effective, very strong mutual fund distributor inside the very channels they needed to drive.
When you put those five points in front of the carrier we represent a very effective partner. And we've been able to grow that from seven relationships to over 34 relationships in basically a year's time. The companies that we associate with now control anywhere between 45% to 50% of the variable annuity flows.
MFMN: What percentage of overall INVESCO sales does that represent?
Kolbe: I think it fluctuates. I would say that in any given environment we are typically around 25% to 30% of the sales of INVESCO, which seems to be a common percentage within the industry.
MFMN: What about the other channels?
Kolbe: I would say the wirehouse and planner channels is probably about 70% and 75% of our sales historically and the insurance is 25% to 30% of the sales. The sales between wirehouse and planners is about 50-50.
Through the second quarter of this year we've had 11 consecutive quarters of positive net sales. We've been able to maintain some sort of momentum right up through the second quarter. Obviously, the results are not in for the third quarter.
MFMN: Have you had the opportunity to sit down and look at the year ahead and set some goals for yourself and for the company?
Kolbe: The answer specifically is no. In the short term since I've been asked to take on this position my focus has been to say, What do we do, how do we do it and how are we going to do it better?' And that mantra has moved me to sit down and basically evaluate everything from our internal desk to our recently added chairman's circle desk where we try to give an extra level of service to our biggest producers, to our key account area, to our regional management, to our wholesalers as well as to our marketing that works in conjunction with my department. And from that I think we'll come out with our goals for 2002.
MFMN: Do you see any areas that INVESCO should move into or improve its presence in?
Kolbe: Moving forward I think we remain interested in bringing our management expertise to the 529 marketplace. I think obviously, when we look at studies, there's growth in the separate account area and we have a very, very strong presence in that through our division out of Atlanta. But we believe we offer some management expertise and we will continue to work with our sister company to perhaps grow in that area as well.