SEI Corp. is combining two hot offerings - annuities and asset allocation services - to create an investment product for sale through banks.
The Wayne, Pa., firm is developing a variable annuity whose investment portfolios combine several mutual funds to create an "asset allocation" mix.
SEI will aim the new product at regional and community banks - those with $10 billion of assets or less.
Many of these institutions want to offer a sophisticated annuity but don't have the assets to create their own, said John Kirk, SEI's associate director of distribution services.
A Share of the Fees
Banks that sell the product would share in the asset management fees collected by SEI, and that should make the product more lucrative for banks than ordinary annuity sales, he said.
The portfolios cull stock, bond, and cash funds to help customers meet specific investment objectives, ranging from conservative to aggressive growth.
SunBank Capital Management, the money management subsidiary of SunTrust Banks Inc., and Merus Capital Management, a unit of Bank of California, are among the firms subadvising the individual mutual funds.
Connecticut Mutual Life of Hartford, Conn., is underwriting the annuity contracts. SEI will use six mutual funds to create seven asset allocation portfolios.
'Best of Both Worlds'
The company's strategy appears to be a new twist on variable annuities, which are tax-deferred investment products that are popular for retirement planning.
Variable annuities have traditionally let customers choose individual mutual funds, not asset allocation portfolios made up of groups of funds.
Industry experts say SEI's approach has merit. The company "is marrying the best of both worlds," said Ann Figueredo, senior consultant with the Spectrem Group, San Francisco.
"They're combining the diversity of asset allocation with the tax benefits of an annuity," Ms. Figueredo said.
Asset allocation "is the real way to invest," said SEI's Mr. Kirk. "Diversification takes out the peaks and valleys, and should result in smoother growth."
Strengthening Relationships
SEI last week filed with securities regulators to begin offering the product, an application process that should be completed this fall, Mr. Kirk said.
The company, already a leading supplier of trust accounting services for banks, sees the annuity as further solidifying relationships.
In fact, SEI called on a number of its bank clients while developing the annuity.
The banks, which already offer SEI's mutual funds and accompanying asset allocation services, were asked how they and their customers would take to an asset allocation product linked to annuities.
"Their input and participation were integral to the development process," Mr. Kirk said.
