Poised to Serve the HNW, and Advisors

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.