From the June 2002 issue of Investment Advisor • Subscribe!

Poised to Serve the HNW, and Advisors

The Phoenix Companies' philosophy toward advisors and its passel of holdings make it worth a look.

The Phoenix Companies Inc. has come a long way from its roots as a life insurance company for teetotalers. Founded as the American Temperance Life Insurance Company in 1851, the company served only those souls who vowed to steer clear of strong drink. It wasn't until 10 years later that the insurance company would modernize its stance by changing its name to Phoenix Mutual Life Insurance Company and start serving those folks who liked to imbibe.

The Hartford, Connecticut-based firm is accustomed to changing with the times; it has transitioned from a retirement income company in the 1930s and '40s, to a financial services company in the 1970s to '90s, to a wealth management firm today.

After serving as a multi-line company from the 1970s to early '90s--offering life insurance, investments, annuities, group insurance, reinsurance, third-party administration, property/casualty brokerage, and trust services--Phoenix decided in 1998 to step back and redefine its strategy. After all, the days of being a "financial services company" that proffered everything but the kitchen sink had become pass?. "In the 1980s and '90s it was more of a supermarket orientation and [the thinking was that] you should be in lots of different businesses," says Jack Sharry, president of the Private Client Group of Phoenix Investment Partners, a Phoenix investment management subsidiary. "But the whole industry learned that you can't be all things to all people, and we have learned that as well."

By the late 1990s, every firm in the financial services industry was determined to serve the scads of high-net-worth folks left over from the roaring dot-com days, the aging baby boomers, and those who were to be the recipients of the coming intergenerational wealth transfer, so the term "wealth management" firm came into vogue.

And Phoenix was primed for the new label. "We were pretty well positioned. We'd always had products in the life insurance and investment arenas that were tailor made for that [high-net-worth] market, including estate planning and managed account products on the investment side," says Walt Zultowski, senior VP of The Phoenix Cos., who is responsible for strategic marketing for the wealth management strategy. Zultowski defines wealth management as being focused on the affluent and high-net-worth market, but "we participate in that arena as a wholesaler. For example, we don't want to compete with Merrill Lynch Wealth Management, we want to partner with them. We want to be a wholesale partner to any organization that has a retail relationship in that high-net-worth market."

Phoenix has distribution alliances with Merrill Lynch, AXA Financial, A.G. Edwards, UBS PaineWebber, Salomon Smith Barney, and Webster Bank, as well as National Financial Partners. Phoenix distributes life insurance products through PartnersFinancial, an NFP affiliate.

In the 1990s, Phoenix went on an acquisition binge, snapping up companies in the investment management and separate accounts businesses. Phoenix acquired the mutual fund company JP Chase in 1972 and established its money management business, but didn't really start to see growth in assets until the early 1990s. By 1993, Phoenix had acquired National Funds (now called Phoenix Goodwin Funds). In 1995, it performed a reverse merger with Duff & Phelps Investment Management out of Chicago, which specializes in institutional fixed income. In 1996, the firm bought 30% of London-based Aberdeen Asset Management. Four transactions occurred in 1997. Phoenix acquired Roger Engemann & Associates of Pasadena, California--which had a strong foothold in the managed accounts business--and Seneca Capital Management, based in San Francisco. Phoenix also formed two money managers, Oakhurst Asset Managers and Hollister Investment Management. In 1999, Phoenix bought Zweig Mutual Fund Group of New York, and Walnut Asset Management, based in Philadelphia. "The idea was to build and buy," Sharry says. "We became a collection of boutiques; we also saw operational efficiencies from which we could represent these boutiques from a distribution standpoint and also handle all the back-office issues that money managers would rather not handle."

But Phoenix's buying binge wasn't over. It entered the private placement variable life and annuity business by acquiring Philadelphia Financial Group in 1999. In 2001, Phoenix bought Capital West Asset Management of Denver. In January of 2002, Kayne, Anderson Rudnick Investment Management of Los Angeles came into the Phoenix fold. Both firms strengthened Phoenix's position in the separate accounts arena.

In 2001, Phoenix also became the third-party provider of wealth management products and services for State Farm Life Insurance Company's high-net-worth customers.

Finally, in March, Phoenix partnered with LJH Global Investments, a hedge fund advisory firm in Naples, Florida. "We've created a strategic alliance. We are essentially financial partners in our arrangement. They are the fund of funds manager and we are the distributor," Sharry says. "We will be representing them in the retail market." Phoenix plans to register a fund of funds this month with a minimum investment in the $25,000 to $50,000 range.

Phoenix also helped accelerate its move into the wealth management business in 2001 by demutualizing Phoenix Mutual Home Life Insurance Company.

By acquiring companies with varying expertise, Phoenix has built a war chest of specialty services that it says allows the firm to be the ultimate partner for advisors. "As a retail advisor, you need to have a general knowledge [about many issues], and then surround yourself with specialists," Zultowski says. "And that's really what we are trying to build: an integrated group of specialists across various product lines that help the retailer become a full- blown wealth management advisor. In today's world, one individual can't be an expert in everything." In fact, Zultowski says, advisors say one of their number-one challenges is just keeping up with all the new products and concepts required to serve the high-net-worth market.

Being the ultimate partner for advisors means moving beyond just providing a broad array of products, Zultowski says. "We are really a wholesale manufacturer and a wholesale distributor, so the question is, 'How do we help the advisor do a better job of taking care of his client?' We know their issues are not just about investment performance, or just about estate planning, or just about trust services, but really, 'How do I pull all this together?'"

Phoenix helps advisors do just that by offering "intellectual capital" in wealth management, Zultowski says, via the company's stable of wholesalers, its market research, and on-staff specialists. Phoenix's three teams of wholesalers, which specialize in life insurance, investments, and annuities, work together to provide an integrated wealth management solution, he says. "Some wholesaling organizations have wholesaling teams that have never talked to one another" and that usually vie for time in front of the advisors.

The wholesalers also get advice from a team of eight attorneys who specialize in trusts and estates, and are armed with Phoenix's annual Wealth Management surveys, which the company has conducted in conjunction with Harris Interactive for the last three years. The surveys poll high-net-worth investors with at least $1 million in assets. This year's survey, which is due out this month, includes a separate poll of 100 advisors. "We looked to see the view of the world through the advisor's eyes," Zultowski says. "One of the interesting things we've done this year is that we've asked some of the same questions of the advisors and the consumers, so we could [see whether] perhaps the advisors are saying one thing, but consumers are saying something different." He says the surveys are an invaluable learning tool for the advisors and wholesalers to use to help them better understand the market.

Sharry says Phoenix has developed a catchword phrase, "Know, Guide, Invest" for advisors to help them navigate and understand the affluent market. "It means providing them with context, perspectives, and decision support regarding what goes on in the affluent marketplace for the advisor. What we have done is try to boil that down into some simple words and concepts." The "know" is helping advisors with business development and business practice, he says. "That's really knowing the market, understanding what's in the heads of the consumer, what's happening with [other] advisors." Next is for the advisor to "guide responsibly," he says. To help, Phoenix has developed a variety of different tools, many of them technology-based, "that make it simple at the point of sale for the client to understand how to put together a portfolio, how to put together a financial plan, and to make it simple for everyone to understand."

And last is encouraging advisors to help their clients invest wisely, Sharry says. "We hope people select our investment products," but the real goal is to offer products that ultimately help advisors invest wisely. The wealth management surveys usually come in handy, he says, because they help Phoenix "better understand the marketplace so we can provide that context and perspective to the advisor."

Reprints Discuss this story
This is where the comments go.