USAA’s Unique Strategy for the Advisor Market

Keith Sloane serves as head of third-party distribution for USAA Investments. Mr. Sloane previously served as a senior vice president at Hartford Investment Financial Services, LLC. Prior to joining The Hartford in 2007, Mr. Sloane served as director of product marketing and led the mutual fund business for Wachovia Securities in their investment products group. He joined Wachovia in 1995.

Steve Fry is director of analyst relations for third-party distribution at USAA Investments. He focuses on home-office research analysts and intermediary-based consultants, as well as evaluates opportunities on USAA’s recommended list. Prior to joining USAA in 2014, Mr. Fry served as executive director of the Analyst Relations Group at Janus Capital Group. From 1998 to 2004, he was vice president and senior product manager for Van Kampen Investments.

I spoke with Keith and Steve on April 27 at the Morningstar Investment Conference.

What is your focus with regard to serving financial advisors?

Keith: USAA started in the intermediary business roughly four years ago. We are the last of the big direct-sold shops. We’ve been in the investment business since 1970 serving our members directly over the phone, over the computer and virtually. Over many, many years our customers would say, “Hey, we love you guys for your insurance or banking, but my primary advisor is in Lexington Massachusetts or with Merrill Lynch.” That demand grew over the years, so we decided to start making our funds available through intermediaries.

I was hired to lead that effort about five years ago, and we were up and running about three years ago. The first step was to make ourselves available on all the major platforms, including the wires, the regionals, the independents and the large custodial platforms. We are now on virtually all of them. We are now available for advisors to access us. Essentially, we are a 47-year start up.

How does your approach to fixed income differ from other institutions?

Steve: What we do differently is the fact that we have a yield-focused portfolio built bond-by-bond with fundamental research that provides investors exactly what they need. For a fixed-income investment, you are looking for yield. Our focus on yield, but more importantly, a keen eye towards tax efficiency, delivers for investors over the long haul a very, very competitive total return, but also income that they have been looking for. That’s what we do best.

We invest in the taxable and municipal markets.

With distributors limiting fund-family offerings, how does this effect the asset manager sales process?

Keith: We have gone from an environment of “open architecture” in the industry with maximum choice to a more controlled architecture. But not everywhere; the custodial platforms aren’t necessarily doing that except at the margin, as they always have. You are seeing the effect of this more at the wires and maybe some of the other large independents.

It hasn’t affected us because we’re relatively new to the platform and our best and most competitive solutions are up and running and they are not affected. Those who are affected are managers who have products that have been on the platform forever. They are in runoff, they are marginal in the quality, and that’s who is affected. But what’s not impacted are the more competitive, better priced, better performing investment solutions.

We’ll be fine and I think most managers will be fine.

Keith Sloane
Steve Fry