In part 1 [click here]
we discussed what Putnam [see profile]
executives hoped to achieve with the PriceCheck&Save
iPhone app that it rolled out this morning and what the barriers are to that app actually having an impact. What was left unanswered is how the app fits into Putnam's strategy and why you should care.
, Putnam's head of DC who demo'd the app with the MFWire.com
, put it rather succinctly: "We want to be the Apple of 401(k)."
Not a modest ambition and one that holds a lot of meaning at many levels.
One iPhone app will not turn Putnam into Apple circa 2011, but the important question is whether Bob Reynolds has taken Putnam to where Apple was in 1999. That was just more than two years after Jobs returned to Apple and a time when many observers still believed that Apple was on trajectory that would take it to receivership, not the top spot on the most-valuable-companies-in-the-world list.
Jobs had spent much of his first two years back at Apple turning things off and using gimmicky but innovatively-designed product features to inspire his followers that good things would eventually arrive. He pulled the plug on licensing the Mac OS to other computer members -- no more clones. He swapped out that Mac OS in favor of his Unix-based operating system at NextStep -- no more backward compatability. He cut most of the choice from the Mac line itself while shaking up branding and design -- no more floppy drives and strange colors on your iMac G3
. Not everything worked -- remember the Mac Cube?
-- but everthing working was not Jobs' main goal.
What Jobs was really doing was rebuilding his team and Apple's capabilities. He dropped legacy compatability in the Mac OS to open the door to a future that only Apple could build. Jobs dropped the IBM PowerPC chip to give Apple a hardware platform under its control to enable it to create a new vision. Then, at the end of 2001 Apple rolled out the iPod. It's debatable whether Jobs saw the iPod's evolution into the iPhone and how the app store would work to turn the iPhone into the portable computer of the twenty-teens, but it does not matter if he did.
Jobs' turnaround lessons are:
Be a thought leader;
Don't be wedded to a failed past; and
Place a lot of bets.
Reynolds at Putnam has taken those bullet points to heart.
He has rolled out iMac (or Mac Cube?) evoking products with the Absolute Return funds.
He has revamped the Putnam OS , ... err portfolio management team ... by lifting PMs from rivals, including his old stomping ground at Fidelity. He also dialed into his rolex, or iPhone address book, to build a new team of marketing, sales and technical people. Again, with many from Fidelity.
He has raised the design standards at the firm -- Putnam's Web tools such as its fund comparison tool for advisors and the iPhone app are beautifully designed even if it is hard to see how they can drive meaningful revenue.
The price comparison iPhone app also reveals another significant change that Reynolds has made. Putnam is now running on the Fascore DC recordkeeping platform it licensed from its sister-company Great-West. Reynolds has said that Putnam has also worked to upgrade the capabilities of Fascore's platform so it performs in the large plan market, a move that likely burned some cash.
By building tools such as the iPhone app and the retirement income-focused participant Web site around the Fascore patform, Reynolds is able to innovate in ways that rivals cannot easily copy. He is also able to catch the attention of plan sponsors and put Putnam in the driver's seat when it wins recordkeeping clients.
Looking at the current market, it is easy to see the vision behind these bets. As a fallen giant, Putnam needs to add assets and fast. Yet, there have been few dollars in motion since the market collapsed at the end of 2008 and those dollars that are moving have mostly moved to bonds and that means Pimco.
Yet 401(k) plans are one of the few places where dollars continuously drip into mutual funds, even when the rest of the world is melting down. That fact alone has caught the eye of many mutual fund managers.
Winning mandates from a Fortune 500 401(k) plan is also a way to potentially pull in hundreds of millions, or even billions, of new AUM quickly. And Reynolds, as much as anyone, knows that while winning a spot on the investment platform is nice, it is nowhere near as effective as becoming the incumbant recordkeeper that is able to dictate pricing and revenue sharing in the plan.
Still, Reynolds faces a big problem: It was much easier to get sponsors to change recordkeepers in the early days of the 401(k) industry than it is a full 30 years after the first plan was adopted. Putnam needs to get in the door to be heard, and getting in the door is no longer simple as many plan sponsors find it too painful to even contemplate swapping recordkeepers today.
That's why Putnam has an iPhone app rolling out today. That's why Reynolds, Murphy and Carney put together a press conference of thought leaders and press when they rolled out their new retirement income focus. That's why all of Putnam's tools are focused on design. That's why Absolute Return funds are a talking point. Reynolds is pulling something shiny and new from his hip pocket so that plan sponsors will once again pay attention.
Ironically, Putnam has quietly made another innovation that has mostly been ignored but is one that has the potential to truly reshape the 401(k) landscape. Learn about that in part 3 [see our sister publication, The 401kWire].
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