Peter Torvik is VP and head of marketing and product development for U.S. Bancorp Asset Management, formerly U.S. Bancorp Piper Jaffray Asset Management, and is responsible for marketing its First American Funds family. Before joining U.S. Bancorp, he was president of DPG Group, an affinity marketing and hedge fund distribution firm. In February, U.S. Bancorp announced a merged with Firstar Corp. When the acquisition was completed in September, the firm merged the First American Funds and the Firstar Funds. Mutual Fund Market News discussed marketing the combined fund family with Torvik, as well as the key aspects of selling funds with a bank as a parent corporation. An edited account of his conversation with Andrew Brent follows.
MFMN: The First American Funds family is the fifth-largest bank-affiliated mutual fund complex in the country. How does marketing and selling mutual funds as a bank differ from that of other investment managers?
Torvik: The biggest difference would be our affiliated channels. We have affiliated brokerage channels and trust channels that account for the bulk of our sales, which makes us more internally focused than, say, a Janus or an Oppenheimer. That's really the main difference.
We enjoy what I would call privileged access' to those channels. Although they sell other funds and other fund companies in all cases, we do have inside knowledge and great relationships across the enterprise. So whether it be Piper Jaffray or U.S. Bancorp Investments, which are financial consultants that work out of the bank branches, our corporate trust department or our 401(k) platform, we do have the inside track with these folks.
MFMN: How does the dynamic work between the funds and the other groups? Do you have the inside track simply because of contact or is it more formal than that?
Torvik: I'd really say it's contact. We don't have quotas. We don't have differential payouts. What we do have is really some great close relationships with these channels. And, you know, we're privy to their strategies and to their needs. It's kind of like arm's length from the standpoint that we do wholesale to them. We have a full team of internal and external wholesalers, a product group, a marketing group a communications group, so we really do treat them the same way they're treated by other vendors, but we're on a first name basis. We all work for the same organization. We all have the same stock options. There are good reasons to work together.
MFMN: Most fund family names carry the name of the asset manager behind them. Where did the name First American Funds' come from?
Torvik: The First American Funds is an old name starting from an old money market fund from the early 80s. So that name has been around a long time and has grown through internal growth and acquisition. The Piper [Jaffray] acquisition [in 1998] brought in Piper Capital and their funds and [funds were added with] the recent Firstar merger. But with the Firstar Funds we went through, I think, a very deliberative review process of what we're going to name our fund company and why we're going to name it that. And First American seemed to have solid imagery around the table.
For regulatory reasons, we didn't feel that U.S. Bancorp was good because of the fact that you can't use the name bank' in fund groups and various things like that. And there were reasons to keep the name separate. Overall we had a million customers with First American accounts, and a name change is disruptive. We didn't feel like the disruption was worth it vis a vis what we thought we might pick up in another name. So we just rallied around the First American name. We've re-branded it, put the George Washington imagery on it, totally new set of materials and marketing tools, and everyone's pretty excited.
MFMN: When did you initiate that re-branding campaign?
Torvik: September 24th was the final merger week [with Firstar] and after that we've been on the road showing off George.
MFMN: Internal road shows?
Torvik: Right, we've been visiting our brokers and groups in their branches both at Piper and the bank. We've been meeting with personal trust officers around the country and really showing them the new fund family that emerged out of the mergers.
MFMN: Clearly, your most aggressive marketing is towards the internal bank and brokerage group. Are there other external channels that you go after?
Torvik: Yes, and we're going to be doing more of that in the future. I think that the size we are now dictates two things. One, that we cannot totally rely on our internal channels for appropriate growth levels. If they grow out of their skin then we grow too, but they have their own growth plans and in some cases, we're going to get tremendous growth internally, and in other places the growth opportunities are not so great with the internal channels.
We're moving though. We've always had sales levels outside of the firm, probably under 5%. Our goal is modest, but meaningful in moving that number in the 10% range. But we can still leverage the bank brand and the bank relationships to give us a calling card in that business with other firms that are affiliated with the bank in different ways.
MFMN: Firms affiliated how?
Torvik: I wouldn't want you to mention any names, but, for example, there's [a fund group] that distributes their funds through our 401(k) platform. They've invited us to come visit them and distribute through their bank platform on their 401(k). We're going to take that invitation up, but first we need to be properly staffed and the proper resources have to be behind that effort because, as you know, if you just get your funds on somebody's platform it doesn't mean they sell. We need to back that up with wholesaling and materials and presence in their markets to make our funds as popular as others.
MFMN: Do you engage in any retail advertising?
Torvik: What retail advertising we do is mostly focused on local issues. For example, if we have a broker that wants to have a seminar and wants to advertise in the local paper and in the local media for their seminar, we'll provide, in some cases, prepared ads and co-op advertising. And so they pay some of the money and we pay some of the money, which helps our local representatives in communities.
We don't do a tremendous amount of mass-market advertising. We've done a number of things--Wall Street Journal, Registered Representative--to commemorate things. It's not so much as a brand building advertising campaign. We rely heavily on the massive amounts of advertising that the bank and units of the bank, such as Piper, do in their markets. We're able to go along for that ride in various ways. Nearly every retail customer of the bank holds a money market fund with our name on it. And as the bank expands its reach, guess what? First American Funds appears on their first statement, and so that's a powerful tool for us. When the enterprise gets a new customer, nine times out of 10, we're going to have a new product with that customer in a short period of time. Our name gets out that way, and it's real leverage for us.
MFMN: On Dec. 10, the asset management unit announced a name change from U.S. Bancorp Piper Jaffray Asset Management to U.S. Bancorp Asset Management. Why the name change? Does that affect First American Funds in any way?
Torvik: Simply put, our group reported to the vice chairman who was in charge of Piper Jaffray and now we're reporting to a different vice chairman. It really has no affect on our business whatsoever. Our unit operates relatively independently as a money manager and it will remain that way.
If you look down the line at other bank fund groups, they have various strategies. Bank One has the One Group, but First Union has the Evergreen Funds, so they have adopted a stance more like ours. Wells Fargo has the Wells Fargo Funds, tightly identified with their bank brand name. And I think there are some subtle differences there, probably not recognized that much by the consumer. We spend more time gnashing our teeth about them the consumer probably does. They're focused on performance, quality, longevity and things like that affect their purchasing decisions. We think the choices we made make sense, and I'm sure Wells Fargo thinks the choices they made make sense.
MFMN: U.S. Bancorp Asset Management has gone through significant changes recently, most notably with the Firstar merger. Have you found that that is helpful from a marketing standpoint because of media attention or is it difficult to implement marketing strategies with huge operational shifts like that?
Torvik: There are two sides to that answer. From a classical marketing standpoint, change is good and bad. In the money management business it's been generally viewed as bad. There is some questions created with our clients. Who's going to be managing my money?' A very legitimate question that anybody should ask if there are changes at their money management firm. And we've tried to address that forthrightly, and for the most part in our firm that hasn't changed. The same people, the same teams, the same process for managing the money. The name of the fund structure may have changed a little bit.
On the one hand, change brings a lot of positives that the customer doesn't see.
