July 28, 2003
Safeco Aims to Boost Fund Sales Via Banks
Safeco Corp. is not known for its mutual funds, but recent changes in many of its 17 portfolios could alter that perception.
The Seattle company, best known for its insurance products, has a $4 billion mutual fund business that has grown slightly in the last year. But very little of its fund sales come from the bank channel, said Kevin Rowell, president of Safeco's mutual funds group.
"We don't expect to be a fund titan, but we do have good, solid products," Rowell said. "The management is there, and the performance of the funds [is] there. We definitely want to get our share in the bank channel."
Safeco has reduced the fees on some funds and also renamed seven. For instance, the Safeco Equity Fund has been renamed Safeco Core Equity, a change intended to make it easier for advisers in banks and elsewhere to sell the product, Rowell said.
"You look at the old name: What kind of equity fund is it?" Rowell said. "It just didn't mean much. Now, advisers can say that this is a core fund. That means a lot more."
Another portfolio, the Safeco Northwest Fund, was also given a more specific name, Safeco Multi-Cap Core Fund. These changes, though just cosmetic, according to some industry experts, could make a difference, they said.
"Sure, it can have some influence," said Geoff Bobroff, president of Bobroff Consulting in East Greenwich, R.I. "You also look at the name Northwest,' and it brings up the point that, at one time, having a regional fund had some appeal. But those days seem to have come and gone. So even if the fund is still investing in the same [stocks], the name could create confusion in the marketplace."
But Bobroff said that Safeco, or any other insurer trying to crack the mutual fund business, is swimming against the tide. When asked whether any insurer could become a real player in the fund business, Bobroff responded with a dismissive "no."
"Insurance companies are good at managing fixed incomes," Bobroff said. "They, like the banks, have a difficult time retaining talent on the investment management side. Talent leaves because of advancement issues, or compensation."
Rowell said Safeco has some advantages as well. For one, it has already established distribution and sales relationships for other products. In the bank channel, Safeco sells fixed annuities.
"Banks know who we are," Rowell said. "The investors also know who we are. The bottom line, however, is that clients don't want to see huge ups and downs. They want to see predictable returns. People have been whipsawed everywhere. They've been clobbered. The greed factor is behind us, and the whole idea of money management now is to help the saved money grow, even if the returns are a little lower."
Or in the words of Ken Ritz, a director in the financial institutions group at the ratings agency Fitch in New York: "Before, everyone was touting double-digit gains. Now, you're happy if you have single-digit losses."
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