After completing a series of acquisitions to increase its retirement services capabilities, Wachovia Corp. believes it now has the size and the powers needed to cross-sell retirement products to its banking customers.
"It is critical to link our capabilities together for smooth end delivery to our customers," said Don McMullen, the president of the banking company's capital management group. "On the banking side, we have 2,100 branches, with 10 to 12 million customer relationships. It is critical to cross-sell to them."
The Charlotte banking company started a strategic initiative Monday to attract more retirement assets through its distribution channels. Mr. McMullen said Wachovia has the capabilities to offer a wide array of retirement services and products but that it must reach its customers.
"People really don't think of banks when they think of retirement," he said. "They think of a specific investment firm or a brokerage firm. They don't realize a company like ours, with banking, brokerage, and asset management, can pool it all together for them."
Mr. McMullen said the capital management group has recruited Bob Reid, a Wachovia executive vice president and the chief executive officer for the Pennsylvania and Delaware markets, to lead the initiative. In his new role Mr. Reid will be responsible for coordinating the retirement strategy across Wachovia's lines of business.
Mr. Reid's background in both retail and wholesale banking made him the ideal executive to bring retirement products and services to a wide swath of the company's customer base, Mr. McMullen said. With baby boomers approaching retirement and equity markets in the doldrums, more investors are looking for retirement advice, he said.
"For an organization our size and the businesses we are in," he said, "retirement hits everything from institutional customers right though individuals."
Analysts said that expanding its retirement capacity has been part of Wachovia's business strategy for at least a year.
Last week it announced its second big nonbank deal of the year - a plan to buy PFPC Retirement Services from PNC Financial Services Group Inc. The announcement came two months after Wachovia had unveiled a plan to create a joint venture brokerage firm with Prudential Securities.
PFPC Retirement Services sells record keeping and other outsourcing services for 401(k) and other retirement plans.
When the PFPC deal closes, analysts said, Wachovia Retirement Services would be one of the top 20 providers of retirement plan services. The deal would add 1,100 plans with $8 billion of assets to Wachovia's 3,000 plans and $42 billion of assets.
Darryl J. Fluhme, the president of the corporate and institutional trust division of the capital management group, said, "Wachovia Corp. has made the decision within the past year that the retirement market is one we want to concentrate our efforts in. We put together a strategic plan."
More than 60 million Americans will turn 65 in the next two decades, Wachovia has noted, and by 2010 IRA rollovers or retirement distributions will be putting more than $500 billion of retirement money in play annually.
Kevin Daniels, a Boston analyst, said that expanding retirement services has been part of Wachovia's strategy since the First Union merger in September 2001.
"Wachovia wants what all banks want - wallet share," Mr. Daniels said. "They look at their customer base after the First Union deal, and they see a lot of untapped opportunities."
Mr. McMullen said that as the integration of First Union and Wachovia was completed the topic that kept coming up was the plain opportunity to offer retirement services and products to the bank's own customers.
The Prudential and PFPC deals are part of his company's strategy for growth, Mr. McMullen said. The agreement with PNC "just happened to occur" within a week of the launching of the retirement services initiative, he said.
"We want to be a full-service bank," he said. "We want to make it easy for customers to work through retirement from the banking side."
"We are off to a great start," Mr. McMullen said. "Pru Wachovia gives us more strength in brokerage. The PFPC deal gives us strength on the 401(k) side, and Bob [Reid], with focus on IRA and IRA rollover and streamlining and linking that with investment services."
Mr. Daniels said that expanding the variety of products available will be crucial for gathering retirement assets but that Wachovia must begin with service.
"Banks have unprecedented access to customers, but that does not mean that they will automatically gain assets," he said. "Banks like Wachovia have to offer the best service and the best products and then they will be able to keep these customers. Banks take a major risk whenever they make a strategic push into a new area because every step could be a false step."
