Insurers Find Ways To Keep Fund Sales Aloft

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In a difficult equities market, some insurers that sponsor mutual funds say they have been have been able to avoid harsh sales slumps and even increase market share by reassuring customers that funds continue to be a smart investment.

“Were trying to increase our visibility with wholesalers and to encourage producers to get in front of clients and reassure them,” says C. R. Shaw, vice president for mutual fund marketing for American Skandia Life Assurance Corp., Shelton, Conn.

David N. Levenson, senior vice president of Hartford Financial Services Hartford Mutual Funds, Simsbury, Conn., says his company is emphasizing to investors that right now is a perfect time to be in mutual funds.

“We tell them that markets may go down but not forever, and if you stay in money markets, you are not ready for the rally, because it will happen,” Levenson says.

The Principal Financial Group, Des Moines, Iowa, emphasizes to financial advisors that its funds are a logical progression of their established approach to clients retirement needs.

“Basically, mutual funds are about diversifying with a strategy with optimal risk/return payoff and fit in nicely with our reps method of selling, which is needs- based,” says Kyle Selberg, director of Principal Financial Group.

American Skandias Shaw says his company is telling advisors that the key to mutual fund sales right now is to keep clients focused on needs rather than on a given funds recent performance.

The company is also emphasizing the place of funds in retirement planning and for 529 college saving plans, Shaw adds.

The holiday season is when advisors should be seeking to make significant fund sales, he points out.

“About 40% of inflows come in the fourth quarter,” he says. “Funds represent a great gifting opportunity, and theres not so much focus [by clients] on performance.”

The company also calls customers attention to the consistent growth of its funds, he explains. For instance, he notes, American Skandia Advisor Funds, managed by Sanford C. Bernstein in New York, has steadily outperformed the S&P 500 index, even though its growth during the high-flying days of the stock market may not have been considered spectacular.

“Everyone would have laughed at us in 1999 [when many funds were boasting 30% returns], but ASAF really resonates now,” Shaw says. “This is a core investment for clients that will be broadly diversified and wont give them a lot of negative surprises.”

American Skandia also maintains a healthy sales volume by encouraging advisors to make appointments with affluent clients and to provide extra service–such as by taking along a company money manager to client meetings to personally brief them on the economy, he says.

The company is also supporting brokers by helping them run seminars and teleconferences for their top clients, featuring talks by American Skandia financial gurus.

The Hartford has seen mutual funds sales decline only slightly over last year. It has outperformed most other mutual fund vendors, Levenson says, with such tactics as its new “Are You Ready?” marketing campaign.

In brochures and seminars, the campaign tells customers they need to be in funds if they hope to benefit from an inevitable market recovery.

Levenson notes, too, that the company has been introducing new products to appeal to skittish investors. Recently, it brought out five new funds, led by Hartford Inflation Plus, which is primarily invested in Treasury Inflation Protected Securities issued by the U.S.

“It provides a means of diversification within fixed income, so we expect a lot of play from that,” Levenson says.

Hartford is also maintaining sales by pushing its producers and brokers to make sure their clients are adequately diversified–which is the basic purpose of funds.

“When people set up a financial plan, they should maintain their investment horizon and recognize that markets do go up and down, but will eventually balance out,” says Levenson.

The company got into the mutual fund business under its own brand name relatively recently, bringing out seven mutual funds and a money management fund in 1996. Now it has 33 mutual funds with $15 billion in assets.

Hartford sells the funds through independent financial advisors, supported by its network of about 130 wholesalers.

“It makes us much more competitive if we dont own distribution,” Levenson says. “It lets us focus on delivering good products.”

The Hartford also supports sales with brochures, direct mail campaigns, seminars and a Web site that focuses on customer education.

“We do more seminars than weve ever done before, because clients are jittery,” Levenson says. “We work closely with brokers, helping them mail out invitations to prospects and existing customers.”

The seminars range over a variety of topics but generally hammer home the ideas upon which all mutual funds are built: the importance of diversification and thinking long-term.

The company also supports financial advisors with training, emphasizing a monthly teleconference with some of the Hartfords portfolio managers.

Hartford reports its mutual fund sales of $3.8 billion are down only 0.5% for the first nine months of 2002, compared to the same period the year before. This decline is well below the average for the industry. According to Investment Company Institute in Washington, the combined assets of the nations mutual funds fell from about $7 trillion at year-end 2001 to around $6.2 trillion as of October 2002.

Principals Selberg says his company has been building mutual fund sales largely upon its established expertise in IRA rollover accounts, which itself is an extension of its strong position in selling 401(k) plans to employers.

One of its newest products, which it plans to introduce early in January, is the Principal Income IRA.

According to Drew Denning, director of income management solutions for Principal, the product brings together a mutual fund with an immediate annuity to give people approaching retirement considerable flexibility.

Denning says the appeal of the Income IRA is for an older investor who would like to grow assets through a mutual fund but is concerned about market volatility and the lack of a guarantee that he wont outlive his income.

“On the immediate annuity side, the person may like the income but be concerned about loss of control over his money,” he notes. “The Income IRA capitalizes on the strength of both [funds and annuities], allowing the investor to slowly transition from a mutual fund to secure income they cant outlive.”

Selberg says the company has also maintained confidence of investors and advisors alike by using reputable money managers who give it a strong lineup of subadvisors for both its mutual funds and variable annuities.

“Often customers are not that sensitive to who the managers are, but the producers are, and we have gained market share in sales through broker dealers because of our high-quality structure for selecting and monitoring firms that manage funds for us,” Selberg boasts.

Despite a falling market, Principal says it has been able to increase its mutual fund market share.

“Sales of our mutual funds, not including annuities, increased by 57% in third quarter 2002 over third quarter 2001,” Selberg adds.


Reproduced from National Underwriter Life & Health/Financial Services Edition, December 16, 2002. Copyright 2002 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.