The United Services Automobile Association, first created as a means for army officers to insure their automobiles more than 91-years ago, has been taking a number of steps into retirement plan portfolios.
In April, USAA linked up with 401(k) plan provider T. Rowe Price to distribute the USAA Nasdaq 100 Index Fund (USNQX) on T. Rowe's platform. USAA also currently has distribution agreements with Fidelity Investments, Vanguard and other platforms including TD Ameritrade, Pershing and E*Trade.
"It's been a team effort that began with building out and starting to implement a strategic plan," said Keith Sloane as its head of third-party distribution. He first joined San Antonio-based USAA Investments in March 2012 after serving as head of The Harford's more than $88 billion in mutual fund business.
The team effort can be seen in the 17 new or expanded dealer agreements with intermediaries that will help offer exposure to USAA's more than 40 mutual funds, which span the spectrum from domestic stocks and taxable bonds to precious metals and minerals, according to Morningstar data.
As of May 31, the USAA mutual fund family had more than $56.1 billion in total assets under management in these funds; all returns were above the category average return for the period, the Chicago-based independent investment research firm said.
One important part of the expansion has been connected to additional staffers and the expansion of the distribution team. While specifics could not be disclosed, Sloane explains that these new faces will find other avenues to introduce "USAA's 42-year-old investment story."
"We have begun hiring a team that includes investment research specialists who will engage research analysts across the firms we want to partner with," he said, noting that a leader "will oversee a wholesaling effort to engage financial advisors from the bottom up."
Expectations for the firm, with long held military values, point to a growing take-up campaign of epic proportions. "In the near-term, we will be in the top two to four distributors in wire, regional and independent channels as well as custodial platforms," the third-party distributions head stated.
The bold claim comes as USAA attempts to penetrate the defined contribution space. Recent data from the Investment Company Institute notes that the U.S. retirement assets increased by $1.5 trillion to over $19.5 trillion in 2012. DC assets made up about $5.1 trillion and IRAs held about $5.4 trillion in total assets. The remainder included public and private defined benefit pension plans, according to the ICI.
Also, 63% of mutual fund owning households first purchased their fund stake from employer-sponsored retirement plans as of May 2012. On the flip side, only 37% maintained their mutual fund relationships outside such employer retirement plans, the Washington, D.C.-based member organization highlighted.
"The 401(k) space is important to our long-term strategy," Sloane said. "...Ultimately, it's about giving our members access to our mutual funds through the channel of their choice. We've found that many members conduct a significant portion of their retirement investing through 401(k) plans and have requested our funds on their platform."
Without "going into numbers," Sloane further explains that what USAA is "setting out to do is not just for the sake of growth; it's about serving our membership and giving them access to our funds through their preferred channel of choice."
The 25-year veteran adds that future direction is hinged on previously set ideologies.
"We want to be very focused and surgical when it comes to growing our third-party business," Sloane said. In terms of staffing support, the distribution head explains that it has "blueprinted our organizational model" and is "building our team."
As the defined contribution crusade continues, Sloane predicts the USAA will "see more growth in staffing that includes adding resources to target the [defined contribution] space." He added its $3 billion target date platform, coupled with its "name recognition, size, scale, breadth of investment solutions, performance and relatively low expenses," will help to push the investment management company to the frontlines of the retirement sector's major players.
USAA Investments said in April that the investment management arm will launch a new target date fund in July 2013. As previously reported by MME, the USAA Target Retirement 2060 Fund will have an annual operating expense of 93 basis points.
John Toohey and Wasif Latif, both vice presidents of equity investments, will manage this particular targeted investment product. Both also manage the USAA Target Retirement 2050, 2040, 2030, 2020 Funds as well as the USAA Retirement Income Fund.
As clients near retirement age for each funds' target date, asset allocation will transition from the traditional 60/40 split of stocks and bonds to a conservative helping of bonds at 70% and a 30% equity stake.
However, this projected growth falls by the wayside when USAA fails to address its membership needs, Sloane states. The former managing director at Wachovia Securities explained that the USAA's mission statement, which touches on "facilitating the financial security of our members, associates, and their families," has remained at the forefront of the distribution team's planning.
"I have been so impressed with the authentic commitment to serve those who serve our country. And this focus on serving the military community is based on our core values, which are military values too: Service, Loyalty, Honesty, and Integrity," Sloane says.
"...It perfectly reflects why USAA is broadening its reach into other intermediaries, which is to serve our members where they want to be served."