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Wednesday, March 05, 2014

Four Messages Helped USAA Get on Schwab

Reported by Tommy Fernandez

By now you should know that USAA garnered a major placement on two Schwab platforms.

In particular, that nine no-load USAA funds are available transaction fee free on the Schwab Mutual Fund OneSource platform, and another 20 no-load funds are available on Schwab on a transaction fee basis.

What you might not be aware of are some of the finer points in the messages communicated by USAA's third-party distribution vice president Keith Sloane and his team to Schwab. It may be worth examining, and possibly, learning from.

"When we developed this strategy, we intentionally identified and targeted intermediaries that we wanted to have access to, that we felt was a benefit to both parties. Schwab has always been at the top of that list. It is one of the leaders in the custodial platform business," Sloane told MFWire.

One big goal of USAA's conversations with Schwab was to demonstrate "credibility of one's capabilities," Sloane said.

"I can't over-emphasize this point, you have to have a very high quality product," he said. "I do believe that gaining access to intermediaries today in terms of getting new product, new providers on the platforms. It's more challenging than ever."

Sloane explained that before this deal, USAA did have an agreement with Schwab, but that it was "very limited," allowing for access to only a few funds, and not on OneSource.

Now Sloane's conversations with Schwab focused on four big messages, which were:

1. USAA was one of the last big direct-only fund families now selectively making itself available to intermediaries. Also, they had been in funds for 43 years and "our resources compete most of the other firms in the business."
2. That USAA's organization is "extraordinarily" stable, with a unique culture and mission, with "tremendous" experience in its investment teams. The firm averages 20 years experience for its PMs, for example.
3. That USA is "one of the most admired brands" in financial services. The brand is based on its military core values such as trust, loyalty and service. "There are still organizations that people want to invest with, that they truly trust and admire."
4. That USAA is working to gain access to intermediaries because "it is being demand by our shareholders." "Our members and our shareholders want the channels of choice, like Schwab, to be able to access us."

For now, USAA is concentrating on the top three performing firms in each of the channels, including trustodians, regionals and independents.

Meanwhile, USAA is also working to build up its own sales and distribution teams.

"We're just getting started. One measure of success is getting on the shelf, but we have much more work to do from here. We have a lot of awareness that we need to build out there,"he said. 

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