Wachovia Corp. says its open architecture investment platform is an about-face from a wealth management strategy that had kept customers mostly in proprietary products as recently as two years ago.
Failing to offer open architecture would be "a slow going-out-of-business sale" for Wachovia's wealth management division, said its president, Stanhope Kelly, because the company wants to be its customers' trusted adviser.
"When there were fewer asset classes and fewer managers," he said, "it was realistic to offer everything through proprietary managers, but it is just not possible today."
On Monday, the Wachovia wealth management division and Wachovia Trust announced that they had signed up 50 equity and fixed-income managers for a list of recommended managers as part of new trust and investment advisory services being offered to customers.
The open architecture platform, called Advantage, now has 117 account managers and mutual funds, as well as 124 state-specific municipal strategies. Mr. Kelly said a series of interviews with customers in the past two to three years led the bank to realize it had to alter its platform in order to continue gathering assets.
"We used to be just a proprietary-only platform, but we have gradually opened it up in the last two to three years, and now the entire platform is open," he said. "We will use some proprietary managers to fill in gaps where they perform well. In our customers' eyes, we wanted them to know we can give them the best of outside managers and the best that Evergreen Investments [Wachovia's investment management subsidiary] has to offer."
Analysts said most large investment managers are trying to change their approach in order to achieve "trusted adviser" status, or to remain so with current customers. For some large banks, this has meant divesting proprietary products or at least being more open to incorporating nonproprietary products on their investment platforms.
Citigroup Inc. and PNC Financial Services Group Inc. were among the big banking companies divesting proprietary fund products in the past year.
"Clients are open to working with banks as their trusted adviser as long as that bank isn't trying to force-feed proprietary products at them," said Burton Greenwald, an analyst at BJ Greenwald Associates in Philadelphia. "Most banks, especially the large ones, are willing to do a '180' in order to maintain their customers."
Mr. Kelly said his platform is better than competitors' open architecture platforms because it brings together Wachovia's trust, brokerage, and asset management capabilities, as well as the products of 50 nonproprietary managers.
"We are attempting to use this platform to become the trusted provider across our investment platform, and our banking and insurance platforms as well," he said. "I believe strongly that our clients will respect us for being objective."
Wachovia will spend a couple of years perfecting the new platform, Mr. Kelly said, and it will include products and services from banks like Northern Trust Corp. that Wachovia considers competitors. Evergreen Investments will continue to thrive, he said, because it has already expanded distribution beyond the parent bank.
"We are only one of the distribution channels for Evergreen," he said. "They are also available through other channels, and they are even on a number of our competitors' investment platforms. Evergreen made the decision several years ago to move in that direction."
Mr. Kelly said Wachovia, which has $298 billion of assets under management, would look to enhance the open architecture platform with more managers, more products, and better technology. "This will be an evolution," he said.
The platform includes a range of traditional investment strategies, including domestic and international equities and fixed-income, as well as a range of alternative strategies for high-net-worth investors that include hedge funds, commodities, real estate, and private equity.
