The new chief executive officer of Curian Capital, a Denver registered investment adviser that supplies fee-based managed accounts, says he plans to grow the business by expanding distribution through banks.
Michael Bell, Curian’s new president and CEO, said in an interview Thursday that — after accumulating $1.5 billion of assets under management since start-up in 2003 by offering diversified managed accounts for a minimum investment of $25,000 — he wants to go beyond broker-dealers and wire houses.
“Banks are well-positioned to distribute managed accounts for us,” he said. “They have a large distribution force and customers hungry for an alternative to mutual funds.”
Mr. Bell was named last week to succeed Clifford Jack. Mr. Jack, an executive vice president and chief distribution officer at Jackson National Life Insurance Co., Curian’s parent company, is to remain on the latter’s board of directors.
Mr. Bell, 42, was a senior vice president and chief legal officer at Curian from its founding in 2003.
He said the company has spent a lot of time reviewing its approach to the bank marketplace. “We have a good understanding of managed account distribution in the bank channel,” he said, “and due to the size of the market, it feels like the bank marketplace is primed and ready for separately managed accounts to be introduced on a broader scale. There is a consumer demand in that channel.”
In October 2003, Curian announced a partnership with the Independent Community Bankers of America to offer separately managed accounts through its member banks. The young company was selected to be the preferred provider of separately managed accounts to 4,700 community and regional banks through ICBA Financial Services Corp., the trade group’s broker-dealer.
At the time, the ICBA’s president said he expected 500 banks to begin offering Curian’s managed account platform. Mr. Bell, however, said Curian does not break out how many accounts come from each distribution channel. About 16,000 advisers offer Curian’s managed account platform, he said, but these are primarily independent broker-dealers and registered investment advisers.
Mr. Bell said the time is right to go after larger banks because bank customers more than ever are demanding investment choices.
“Banks have to look to integrate more nonproprietary offerings,” he said. “To do that there will be a movement into managed accounts and toward an open architecture approach to managed accounts. By doing this, banks can offer new asset classes and improve performance.”
Banks large and small have deep and broad ties with the mass-affluent customers that Curian hopes to reach, Mr. Bell said. “This is a perfect market base for us,” he said. “Banks have an extensive distribution network and a long history of providing investment management services.”
“We are bringing this product offering from the high-net-worth to the mass-affluent and providing a real alternative to mutual funds,” he said. “There is a lot of head room in the managed account space when it is being offered to the mass-affluent.”
Analysts saw a lot of challenges for Curian if it wants to sell its service to banks.
“Banks are still trying to get acclimated [to] offering third-party products,” said Burton Greenwald, an analyst at BJ Greenwald Associates in Philadelphia. “Managed accounts are still relatively new and unique.”
Mr. Bell agreed that there will be a learning curve. Curian is working hard to educate banks and advisers about managed accounts, he said.
“Proprietary investment management has always been core and central to a bank’s proposition,” he said. “Now they are learning to offer more choices.”
Mr. Bell said investment choices are essential for banks if they want to retain customers.
Curian has worked hard to find ways to attract more advisers, including banks, to its platform. In August, it introduced a series of concierge services for advisers. It creates a stock portfolio for each investor consisting of 10 to 20 style-specific money managers and, typically, positions in up to 500 securities.
More companies are offering fee-based products to banks. Fundquest Inc., an independent provider in Boston of fee-based products, has relationships with five banking companies including Bank of America Corp., Comerica Inc., and Huntington Bancshares Inc.
“There is certainly a growth opportunity in the bank channel,” Mr. Bell maintained.
