ven with the downturn some things still have not changed. Good performance and the right product will when you shelf space with distributors. That is the lesson that American Funds
is showing the retirement industry.
The Los Angeles-based fund firm has recently won space with two significant bundled 401(k) providers -- Nationwide Life
and Hartford Financial
-- specializing in advisor sold plans.
, vice president and managing director of the Hartford's corporate retirement plan business said the insurer added American Funds to its Director Advantage 401(k)
in response to "high demand" from both brokers and plan participants. Among the eight American Funds added by Davey were five equity funds and three fixed income funds.
Meanwhile, Nationwide added twenty American Funds to its Best of America 401(k)
program. That plan is sold through third-party administrators, primarily to smaller plan sponsors. The program now offers funds from roughly 50 fund families, said Michael Butler, senior vice president in the retirement arm of NFS Distributors.
Why the popularity of the funds? For advisors and TPAs the appeal is two-fold -- American Funds offers an innovative lineup of "R"-share class funds. The five flavors of retirement shares essentially let the advisor and TPA custom price the plan depending on the needs and size of the plan sponsor. "It is almost like 'dial-a-price'," said one West Coast advisor that now places many of his clients with American Funds.
Though some consultants wonder whether the American Funds R-shares are canibilizing the firm's existing business as advisors convert A-shares to the new structure. The moves by major distributors to add the shares show that the demand for the product is there.
American Funds' relatively low management fee compared to other actively managed, broker-sold fund families also appeals to advisors who seek to show sponsors that they are adding value.
What also doesn't hurt is the strong relative performance of American Funds since the blow up of the Nasdaq three years ago. "You know that they are not going to embarrass you," another advisor told the MFWire.com.
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