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Boston is a Mecca of the money management industry, serving as headquarters for a fair number of mutual funds, broker-dealers and fund managers. This being the third Lunch with Research to be based in Boston over the past four months, I no longer need advice on Beantown’s culinary specialties. I promptly settle for the catch of the day, especially since we’re having lunch at a place called Kingfish Hall, part of the city’s historic Faneuil Hall complex.

Kevin Rowell, hired to head the U.S. sales effort at Pioneer Investments a little over a year ago, is no stranger to Boston either. Early in his career, he spent a decade working for another local firm, Putnam Investments, which included a stint in Milan, Italy.

It so happens that Pioneer, one of the oldest U.S. mutual fund companies, has been owned by Milan-based UniCredito Italiano since 2000. But in Rowell’s case it is merely happenstance. First-hand knowledge of Italy may help him get on with his top management, but his mandate is to bolster the company’s sales in the U.S. market.

Rowell points out that UniCredito adopted the Pioneer brand for its global mutual funds operations. Indeed, boosted by the Italian bank’s recent acquisitions in Europe, Pioneer has become a global powerhouse, one of the world’s top 50 money managers, with assets under management surpassing $350 billion. But less than one-fifth of this amount is managed in the United States.

At home, too, Pioneer has been growing through acquisitions in recent years, buying Safeco Mutual Funds (where Rowell was once president), AmSouth Bancorp’s mutual fund business and Vanderbilt Capital Advisors. An alleged attempt last year to snare Putnam, another of Rowell’s past employers, was unsuccessful.

Rowell skirts this subject. He is more interested in talking about organic growth. Nevertheless, before launching into the description of his marketing strategy, he gets one unpleasant subject out of the way. Until last year, Pioneer was suffering net redemptions in the U.S. market. Rowell attributes this to the fact that Pioneer has one of the largest portfolios of high-yield investments in the industry, “but many people just moved out of the high-yield asset class.” But it is also the reality that in a bull market interest in actively managed funds has diminished.

A Scientific Approach

In 2006, Pioneer did experience a strong turnaround in its U.S. operations. Rowell points out that last year was the firm’s best in its hallowed 78-year history in terms of sales. Net redemptions in 2005 turned to net sales of over $5 billion last year.

Favorable market conditions obviously played a role in this, but Rowell wants to talk about initiatives he is putting in place to lay the groundwork for success in the future. All are based on Rowell’s view on how the financial planning marketplace is evolving — and how a mutual fund company should respond to industry changes.

“Advisors spend much less time making investment decisions,” he says. They are outsourcing them to investment selection units at their broker-dealer, focusing instead on gathering assets and spending time with clients.”

With so much of investment advice now provided on a fee-based basis, advisors are spending more and more time taking care of their clients, learning about their lifestyles and other, non-financial problems they face and offering “life-coaching” advice in a variety of unpredictable situations. They have their hands full concentrating on this aspect of their job.

Decisions are now made by units of 18 to 25 analysts who are selecting investments and portfolios based on their organization’s investment platforms. Rowell estimates that fully 45 percent of investment flows pass through such teams, and this proportion is growing.

In response to this change, Pioneer is developing a platform research group, consisting of CFA-level professionals, who will focus specifically on fund selection units at wirehouses, broker-dealers and in some cases, major banks. They will speak the language, think like analysts and understand their investment strategy.

To get financial analysts face to face with their colleagues, people whose judgment they respect, seems like a sound sales strategy. “If people on those fund selection units want to know, for instance, what our buy and sell criteria are, it is much better if we have another analyst, not a salesperson, answer their questions,” says Rowell.

Rowell’s ambition is to customize Pioneer’s approach to most large financial planning organizations: “The needs at each major firm are different. We want literally to reverse-engineer their investment platforms.”

For example, he says, if a company wants to replace a mutual fund in a 10-fund portfolio, it is useful for Pioneer to know not only what fund they will be dropping and why, but what the other nine funds are. In effect, says Rowell, Pioneer sales professionals get about an hour to make their case to decision-makers, and he wants to ensure that the discussion is conducted as efficiently as possible.

“We are going to get very scientific about it. We are getting away from retail — moving toward institutionalization in everything we do,” says Rowell.

Adding Value for Advisors

While advisors concentrate on their job, they often need a lot of assistance to do it right. Says Rowell: “We realize that advisors are not interested in hearing about performance information, since they outsource investment decisions. In order for our sales force to get any time with an advisor, we have to add value for them, help them make money.”

The company has implemented an Advisor Access program specifically to meet advisors’ needs. Some broker-dealers have also hit upon this idea, requiring vendors who set up booths at their conferences to provide practice management advice to their reps. Rowell says that the trick is to run a highly professional, top-level operation. For example, Pioneer has been bringing M&A lawyers to discuss such issues as acquiring or selling practices, something advisors have been very interested in. A highly successful program, designed for Tier One professionals, has been to teach advisors, portfolio managers, accountants and other professionals how to present and sell to high-net-worth individuals.

Just the Right Size?

Some industry observers suggested last year, at the time of the alleged Putnam bid, that Pioneer may be too small in the United States to become a major player in this market. However, Rowell says that the company is just the right size — nimble enough to respond to challenges, yet large enough to have the necessary muscle.

Indeed, taking into account the global reach of UniCredito, it seems like a fair statement. For example, responding to the graying-of-America conundrum and the need many advisors feel to provide steady income streams to their retiring clients, Pioneer is working to bring to the United States some of the structured products the parent has developed and marketed in Europe and other markets.

The parent’s global expertise may find another outlet in coming years. As a large proportion of Americans move into their retirement years, the U.S. economy may become less productive. Rapid growth is already shifting to younger, less affluent nations in Asia, Latin America and elsewhere. Rowell estimates that 25 percent of investment flows last year were toward non-U.S. markets, underscoring the ongoing process of global diversification.

Perhaps his knowledge of Italy and closer links with the Italian parent may yet serve Rowell well, after all.

Who: Kevin A. Rowell, President, Pioneer Funds Distributor

Where: Kingfish Hall, 188 South Market Building, Faneuil Hall, Boston

On the Menu: Catch of the day, garlic spinach and reverse-engineering investment platforms.

Alexei Bayer runs KAFAN FX Information Services, an economic consulting firm in New York; reach him at [email protected]. His “Global Economy” column in Research has received an excellence award from the New York State Society of Certified Public Accountants for the past four years, 2004-2007.


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