Massachusetts Financial Services is making a major push into the business of servicing retirement plans.
In addition to reorganizing and expanding its retirement-services division, the Boston-based mutual funds company is designing new products for defined-contribution plans, such as 401(k) plans.
Last month, the company began selling the MFS Fixed Fund, which pools guaranteed investment contracts and similar investments for defined-contribution and pension plans.
The primary reason for adding this fund to MFS' product lineup "is that the No. 1 investment objective for 401(k) investors is a fixed investment." said Doug Grip, senior vice president and head of the retirement-services division.
A 401(k) is a salary-reduction plan that allows employees of corporations to save for the future while sheltering part of their compensation from taxes.
Such plans are called defined-contribution plans because workers set aside a specific amount of money. Returns vary depending on how investments are allocated.
More to Come
The MFS Fixed Fund is a harbinger of future moves. More product launches are planned for after Jan. 1, Mr. Grip said, but he declined to elaborate.
"This is one of many things that we are trying to do to expand" in the defined-contribution area, said John Reilly, an MFS spokesman.
In response to consumer concerns about performance, service, and price, MFS launched the Fundamental 401(k), a simplified pension plan, in May.
In the retirement services division, the marketing staff has more than doubled from 19 people last year to 41 now.
In 1992, Mr. Grip had three wholesalers dedicated to the retirement-services market. Today, he has four wholesalers hawking the company's wares to institutional customers and nine more dedicated to retail sales. In a year, the marketing staff more than doubled to 41.
Sales up 300%
For the first nine months of 1993, sales were up 300%, compared with the same period of 1992. "We'll wind up with about a quarter-billion [dollars] or more in 401(k) sales this year," Mr. Grip predicted.
The Fixed Fund, which started selling in mid-October, has already posted a $12 million contribution to Mr. Grip's goal.
The fund invests in units of the BT Pyramid GIC Fund, which is managed by Bankers Trust Co. There are no up-front sales fees, and brokers are compensated with a 25 basis point annual trail commission.
"The key to everyone's 401(k) effort is technology," Mr. Grip said. MFS recently began using TA 2000, a daily record-keeping system from DST. The system "allows us to keep competitive," he said.
MFS' pension study group says defined-contribution plans are growing. As a result, the granddaddy of the mutual fund business, which manages $33 billion in assets for 1.6 million institutional and individual investors, is striving to become a bigger player in the retirement-services marketplace.
"We're only just beginning," Mr. Grip said.