To expand its distribution network, Union Bank of California has set up a division to attract financial planners to its mutual funds.
Union Bank chose to target financial planners because they are one of the fastest-growing distribution channels for investment products and services, said R. Gregory Knopf, managing director for mutual funds at Unionbancal Corp., the parent of Union Bank. The new unit, Highmark Advisor Services, push the Highmark family of mutual funds, which have $9 billion of assets under management in 14 portfolios.
Marketing through outside channels such as financial planners is critical to the success of the Highmark funds, Mr. Knopf said.
Right now the Highmark funds are marketed in-house through branches of Union Bank, which is majority-owned by Bank of Tokyo-Mitsubishi Ltd., and externally through agreements with brokerages including Charles Schwab & Co. To help the sales push, Union Bank has hired a national wholesaling manager, Robert Barry, from Schwab Institutional Services, where he held a similar post.
Ibbotson Associates, a Chicago-based provider of asset allocation services, will supply products, training, and information to financial planners on behalf of Highmark Advisor Services, Mr. Knopf said. He said the affiliation with Ibbotson will make the Highmark funds more attractive to financial planners and lead to more distribution.
"We believe this will be a strong service offering," Mr. Knopf said. "Naturally if we provide services to the financial planners, there's a good chance they will use our funds."
Under a revenue-sharing agreement with Highmark, Ibbotson's compensation will be tied to the assets raised through its services.
Union Bank's move to appeal to financial planners is "a sound strategy," said Dennis Gallant, an analyst at Cerulli Associates of Boston. "It's basically broadening the market for their financial management products. Now they can avail themselves of a nationwide network."
Financial planners are "expanding very rapidly [as a channel] and have caught the attention of many fund companies who have set up wholesaling representatives to specifically target them," Mr. Gallant said.
Unionbancal will have to maintain solid fund performances to keep the financial planner segment interested, Mr. Gallant said. "Financial planners tend to be more performance-driven, and they'd have little patience with funds that don't do well."
Mr. Knopf said he is confident the Highmark funds will continue to perform well. He also said Highmark will supply "access to institutional research and frequent and easy access to fund managers" to make the funds more appealing to financial planners.
