Eli Broad, chairman of SunAmerica Corp., is sold on banks.
The Los Angeles company, which gears its annuities and mutual funds to "pre-retirement" savers, is aggressively wooing banks to market its wares.
And though the company currently does just a sliver of its business through banks, Mr. Broad expects big changes over the next two years.
"Banks will be a good part of our distribution," Mr. Broad said in a chat over lunch last Thursday. "They are very important to us."
SunAmerica, which manages $23 billion of assets, last year derived roughly 10% of its sales volume from banks. "It's not going to be big numbers until 1996," Mr. Broad said. But he expects banks to double their sales of investment products by then.
While Mr. Broad clearly wants banks to sell SunAmerica's mutual funds and annuities, he says the company will have to be a true partner to banks. "Bankers don't want concessionaires on their premises," he said.
To that end, he is emphasizing a somewhat ambitious strategy of helping banks create their own investment products.
Earlier this year, the company announced plans to help Chase Manhattan Corp. and First Interstate Bancorp Create proprietary variable annuities. These tax-exempt savings vehicles combine the features of a mutual fund family and an insurance policy. Under the arrangement, SunAmerica will underwrite the insurance contracts that back up the annuities, a role that is off limits to banks.
Mr. Broad said several similar deals are percolating. "We're at the stage where there should be some announcements in the next 30 days - one, if not two," Mr. Broad said.
By yearend, he expects to boost his roster of variable annuity partners to seven or eight banks. Mr. Broad said he plans to stop there, because his strategy is to pair up only with major banks that have developed investment sales know-how and take them to a higher level.
Selling More than Money Funds
"They have to demonstrate that they can sell mutual funds other than money market funds," Mr. Broad said. "If they can't sell mutual funds, they're going to have a hard time selling variable annuities."
Looking beyond banking, Mr. Broad said he is involved in a lobbying effort to establish a "national retirement savings policy." He said such a policy is needed because the growth of defined-benefit retirement plans means that responsibility for investing pension assets has shifted from employers to workers.
"We have made most middle-income Americans pension fund managers, and we haven't trained them to do that," Mr. Broad said. Many workers are investing long-term assets in short-term instruments, such as money market funds and certificates of deposits, he said.