When the going gets tough the tough get going--or at least consider new-fangled strategies.
That is true for SAFECO Life & Investments, the insurance and financial services company of Redmond, Wash. Seizing upon a newly adopted product creation strategy that has thrice proven financially fruitful, SAFECO will be expanding upon its new distributor-centric approach, which has been dubbed "Ready, FIRE - AIM!"
SAFECO's new strategy calls for it to seek out and identify product distribution partners as the very first step in the product development cycle--long before it ever considers exactly what specific product or products it will craft.
That's a major shift from the old "Ready, Aim, FIRE" product design methodology whereby SAFECO first created a product, then targeted the product to a specific distribution channel, said Randy Talbot, president of SAFECO in a telephone interview.
Refocusing on Distributors
The new strategy entails focusing on potential distribution partners, both current and potential, to discover what products they need and what niches SAFECO can fill, Talbot said. Then, products can be collaboratively created to meet those needs. SAFECO is publicly seeking input from its distributors regarding the potential creation of mutual funds and/or life products, including variable annuity products, he added.
Moreover, SAFECO isn't demanding that a product co-created with a partnering distributor necessarily carry the SAFECO brand name. "We would brand it (to another company) if the idea was good enough and the distribution was right," Talbot confided.
Talbot pointed to a trio of successful SAFECO partnerings using this innovative approach as the overwhelming reason behind broadening the distributor-focused approach.
Three years ago, SAFECO co-created an insurance product for a bank-owned life insurance group and has so far seen $2 billion in new premiums. It also partnered with a bank to create a fixed annuity for bank platform representatives that within the past six months has grabbed $350 million in new assets.
And, most recently, this past June SAFECO launched the SAFECO Select Annuity, a single premium fixed annuity that was designed to be sold by financial consultants stationed in the multistate financial center locations of Washington Mutual Financial Services Group of Seattle. The annuity is also being sold through SAFECO's network of independent agents.
SAFECO currently distributes its insurance and other financial products through several channels including third party Administrators (TPAs) and benefit firms, licensed regional broker/dealers, a network of multiline independent insurance agents as well as dedicated life insurance agents.
SAFECO's financial products include a family of 17 retail mutual funds--eight equity funds, seven fixed-income funds and two money market funds--with a collectively $3.4 billion under management. That does not include institutional funds and variable annuity sub-accounts.
Co-Creating Mutual Funds
Mutual funds are definitely one of the areas in which SAFECO is looking to partner with distributors in the product creation process. "The mutual fund marketplace happens to be in a down cycle now; not out," Talbot said. "But we won't entertain just any idea. It needs to be a solid idea, a program that works as stated and one that has quality distribution."
Building specific products co-designed to meet the peculiar needs of individual distributors may be one approach to launching s product, but it is not a one-size-fits-all formula, said industry executives.
Most products are erected through a combination of strategic positioning, appropriate marketing, distribution assessment, product timing, and tons of scrutiny, all designed to assure that the product is good for the investor, good for the distributor, and is viable for the long-term for the sponsor/manufacturer, said one fund industry executive.
Still, designing a product can and does often start with the product idea itself, even when distribution strategies play a role.
New Product, Old Distribution
Case in point. In July, Manulife Financial, the Boston-based insurance and financial services company, began offering the Manulife College Savings Plan, a Section 529 college education savings plan through a partnership with the University of Alaska as trustee for the state-sponsored Alaska Trust.
Manulife decided that it wanted to create the education savings product, and only then sought out partners. "The design originated within our firm. Then we reached out to six partners and asked if they would like to join our platform," said Tyler Carr, National Sales Manager for Manulife's College Savings Plan.
Manulife who designed the plan and is providing the marketing, sales and distribution, then sought out T. Rowe Price of Baltimore as the plan's back office and customer service administrator, and then reached out to five other well-known investment management firms to see if they wanted to offer their retail mutual funds within the program, Carr said.
While distribution was a consideration in the creation of the Alaska state 529 Plan, it certainly wasn't the only factor, Carr said. Still, Manulife is eagerly leveraging its three current distribution channels for distribution of its new college savings program, especially since the firm caters predominantly to wealthier investors through all three channels.