Russell Investment Group is expanding its retirement services group by hiring wholesalers nationally as it looks to increase distribution through banks and other channels.
Matt Smith, the managing director of retirement services at the unit of Northwestern Mutual Life Insurance Co., said banks will be an important distribution channel as the Tacoma, Wash., company looks for growth.
“Banks have a healthy defined contribution business because they have always been in the business and they will continue to be an important provider of defined contribution services,” he said. “It is going to be important for banks to diversify their lifestyle funds in order to compete.”
Consequently, he said, Russell sees an opportunity to peddle its LifePoint Funds — asset allocation portfolios that comprise life-cycle funds which automatically rebalance as the customer ages and lifestyle funds that reflect the customer’s risk profile and accumulation goals at the time of purchase. It would use banks and other distributors, including registered investment advisers and independent broker-dealers.
“LifePoint is the key focus of our U.S. retirement business,” Mr. Smith said. “Clients come to us and want building blocks for their retirement, and we build everything around these products.”
The LifePoint family accounted for $7.5 billion of Russell Investment Group’s $23 billion of assets under management at June 30. And the family had $1.7 billion of Russell’s $3.5 billion of net cash inflows last year.
Mr. Smith said these inflows are enabling Russell to expand its network of wholesalers and distribution agreements. In the past 18 months, its U.S. distribution staff has grown about 60%, and since September the retirement services unit has added 12 wholesalers, expanding the staff about 30%.
Last week, Russell added Jay Slusher, a former executive of JPMorgan Retirement Plan Services, as sales director of the retirement unit’s 12-state central region. “We have grown the sales force pretty rapidly over the last 18 to 24 months, and we plan to continue that growth,” Mr. Smith said. “We want to develop our sales force in a very measured way.”
Asset allocation funds have been growing rapidly in recent years. Analysts and executives say the popularity of these ready-made funds is good for banks.
“This is a product in great demand, and banks can sell it over the counter and gather a lot of assets with it through their branches,” said Michael Porter, a senior research analyst at Lipper Inc., a Reuters company.
More banks are opening life-cycle funds as the product gains momentum, he said. Since the end of 2003, he said, the life-cycle fund total has grown to 78, from 60, and he expects it to reach 100 by yearend. Lipper reported in March that assets in life-cycle funds had risen 37.8% last year, to $139.7 billion.
Companies like Barclays, Vanguard, Fidelity, and T. Rowe Price are the top providers of life-cycle funds, but big banks like Bank of America Corp. and Wells Fargo & Co. are among those joining the fray.
“These types of funds are gaining a lot of steam and momentum right now,” said Marianne Sullivan, a senior vice president for investment client services at CitiStreet, the joint venture retirement business of Citigroup Inc. and State Street Corp. in Quincy, Mass. “They have really caught a tailwind as everyone wants to get into this market.”
Mr. Smith said Russell began offering life-cycle funds in 1997 but had been developing these building-block retirement products for advisers since the 1980s. Since 2001, it has added Principal Financial Group in Des Moines and Manulife Corp. in Toronto as distribution partners for the funds. American United Life Insurance Co. was signed up as a distribution partner in March.
Russell wants to keep adding distribution partners, Mr. Smith said, and is in talks with several potential defined contribution partners.
“We are … seeing some of the fruits of our labor of the last several years,” Mr. Smith said. “We are expanding our retirement services business, and overall we are expanding U.S. distribution with these LifePoint funds.”
