Kevin Rowell helped Alliance Capital move into the bank channel with its mutual funds three years ago. He did the same while at Putnam in the late 1980s.
Now he's trying to do it again as the recently named president of the Safeco mutual funds group, a subsidiary of Seattle-based Safeco Corp.
"Banks are going to be an important part of our mutual fund business," said Rowell, who was the head of global relationships at Alliance. Before that, he was Alliance's director of national sales, heading its independent planner and financial institution channels. "In 1997, Alliance had nothing in the bank channel, [but] by 1999 we had $2 billion in sales," he said.
Rowell said Safeco has some built-in advantages, the primary one being that Safeco already has relationships with banks. It was the 11th-largest fixed annuity provider through banks in the second quarter, with $290 million in sales. It only became a big fixed annuity player in the bank channel last year.
"Safeco's been a big hit in banks," Rowell said. "Banks want a company that has heritage, is consistent and conservative. Safeco has 70 years of heritage; it's a successful company; and banks will listen."
Mutual funds will strengthen Safeco's distribution agreements with banks, he added. "Banks want to consolidate their lists, so if they have a good relationship on our annuities, they'll look at our funds," Rowell said.
Safeco has $3.9 billion in assets under management in mutual funds, though little of these sales were made through banks.
But Safeco is not spending its time in the bank channel wisely, said Bob Wick, a principal at the Cramer, Wick & Associates consulting firm in Davidson, N.C.
"I think Safeco has other opportunities within the bank channel that would warrant their resources, such as how to become a top 10 distributor," Wick said. "Don't think mutual funds will be the Trojan Horse. And for those bank customers considering the purchase of funds, one would think name recognition.'"
"If they had a strong variable annuity/life portfolio, like a Hartford, perhaps they would have something to leverage," Wick said. Safeco is getting away from its core business by pushing mutual funds through banks, he added.
Safeco had $4.5 million of variable annuity sales through banks in the second quarter, making it a non-player in that product. But Rowell said Safeco's plans are similar to what many other large mutual fund players have done with banks.
"Some of the biggest [fund] providers are owned by insurance companies," Rowell said. "Sun Life owns MFS; Alliance Capital is owned by Axa; and other providers are also owned by insurers."
Another example, he said, is Oppenheimer, which is owned by MassMutual Life Insurance Co. of Springfield, Mass. But Peter Patrino, director of insurance ratings in the Chicago office of the New York-based ratings agency Fitch, said some people, particularly sophisticated investors, may shun Safeco funds because it is known as an insurer.
"On the other hand, there are other sophisticated investors that will go beyond the company name and take a look at the underlying performance of the funds," Patrino said. For most investors, the lines are all blurred anyway, he added.
"Another factor is if the investor has had other relationships with the insurer. Did they have a good or bad relationship with them elsewhere, like with auto insurance?," Patrino said.
"But for the majority of investors at the bank branch, and a majority are conservative, they'll rely on the bank branch. Of course, for any insurer, it will be hard to compete with a Vanguard or Fidelity. That's like competing with an Allstate or State Farm on the insurance side."