By Tom Stabile
AUGUST 22, 2008
(FireFund) Genworth Financial on Monday unveiled a newly integrated managed account platform, completing a merger of its former in-house program with the AssetMark business it bought in 2006.
As part of the changeover, Genworth is parting ways with Wilshire Associates of Santa Monica, Calif., an investment consulting firm that had served as money manager selection and asset allocation consultant for AssetMark since 2002. It is replacing Wilshire with two other investment consultants - San Francisco-based Callan Associates and Rocaton of Norwalk, Conn. - that now have similar, overlapping roles.
The moves complete an integration of technology, products, and services that took nearly two years to execute. Genworth is based in Richmond, Va., but had both legs of its turnkey business in California, with its legacy Genworth Financial Asset Management arm in Encino and the former AssetMark in Pleasant Hill. As of Monday, Genworth retired both names and has dubbed the merged unit Genworth Financial Wealth Management, which now serves all of its 4,500 financial advisor clients, who primarily are independent registered investment advisors (RIAs) or advisors affiliated with independent broker-dealer firms.
Genworth made its decision to change due diligence consultants in June, and Wilshire will be staying on board in a transitional role until October 31, says Gurinder Ahluwalia, co-chairman of the new Genworth wealth management unit. While Wilshire had a broad investment consultant role in its AssetMark assignment, Callan and Rocaton are expected to work on more of an independent consultant basis, providing input that Genworth will use to make decisions about manager selection and asset allocation planning.
Callan and Rocaton will have overlapping roles and likely will work independently of each other. The main contact for manager inquiries will be Zoë Brunson, the Genworth wealth management unit's director of investment strategies.
The integration of platforms and change of consultants should have minimal impact on third-party managers currently on the platform, Ahluwalia says. "Our investment team is always looking at the roster, but it's not like we're eliminating any strategies," he says. "We took the best of both strategies and kept them alive. This integration is growth-oriented."
Wilshire, Mercer, Callan, and other prominent investment consultants have been making moves in recent years to leverage their expertise in evaluating money managers for institutional investor clients by providing similar advice to financial intermediaries - such as third-party platform providers - that supply managed account products to wealthy investors.
The new assignment continues a rebound for Callan in its efforts to expand its wealth management presence, following its April launch of a unified managed account product aimed at wealthy investors. Callan had lost a big assignment last December when Charles Schwab & Co. decided to take over the manager selection duties for its in-house SMA platform, which has $36.1 billion in assets and which had used Callan as an outside consultant since 2001.
Hiring Callan and Rocaton could signal a change down the line in Genworth's manager selection focus, says Tim Welsh, president of Nexus Strategy, a consultancy on advisor issues in Larkspur, Calif. "There could be some impact, otherwise why make the change?" he says.
But the Genworth assignment in itself shouldn't be tagged as a big win or loss for Callan or Wilshire, because both firms have relatively small wealth management units compared to their size on the institutional side, Welsh says. "It's an area that's interesting to both of them, but I don't think from a market share point of view that it's material to them," he says.
Genworth's new platform essentially opens advisors who were clients of either of the former programs to the services offered by the other. And because there was little overlap of third-party products - such as separately managed accounts (SMAs) - on the platforms, as well as few advisors who were already using both platforms, the change means a significant expansion of offerings for most clients, Ahluwalia says.
"That fundamental observation made the deal so compelling," he adds. "We were both playing in the independent advisor space and both trying to help advisors grow. From whichever side they were doing business, we've made it a much better experience for them."
Ahluwalia says Genworth spent "millions of dollars" on the integration, which took place in the background as advisors continued to use their legacy platforms until this week. "There have been a ton of changes over the last two years, but we took the approach when we launched this of not disrupting the way advisors work with it," he says. "We decided to let them keep working [on their existing systems]. On the first day, 500 advisors logged in and utilized the new system, and we have heard it has been an overwhelmingly positive experience."
Since the AssetMark acquisition, Genworth been among the top three turnkey managed account programs in the quarterly rankings of assets under management compiled by Cerulli Associates, a list which includes mutual funds, SMAs, and other products. Genworth reports having $18 billion in assets under management, and Ahluwalia says about half of that is in SMAs.
Ahluwalia says the new wealth unit has kept most of the product lineups it offered to advisors intact, including SMA, mutual fund wrap, and unified managed account options from both former platforms. Across all of the platforms, it now has 25 SMA managers.
The main difference between the legacy units was on services beyond the managed account platforms, Ahluwalia says. The Genworth side did most of the asset allocation planning in house, and offered its own back-office custodial services to advisor clients. The AssetMark side worked with multiple custodians, and also offered practice management and client relationship management tools. Now, both sides have access to the features the other lacked, he adds.
Genworth reported it was paying $230 million for the AssetMark business when it announced the acquisition in June 2006, along with additional performance-based payments of $110 million over a five-year period, according to FundFire archives. The Genworth parent is a Fortune 500 company with business lines in insurance, mortgages, and annuities. It has $114 billion in assets. It became a public company in 2004, but has roots in older companies.
