SAN FRANCISCO — Russell Investment Group has begun to phase out the sale of managed accounts on its own platform.
The Tacoma, Wash.-based money manager began making Envestnet Asset Management Inc. of Chicago the packager of its managed accounts this spring, and the companies plan to complete the handoff by sometime next year.
Russell made the move to ease potential channel conflicts and to open new lines of distribution, according to the company.
But one rival contended that Russell is also evading accountability.
“Russell may say they outsource [to Envestnet], but they don’t,” said Wayne Withrow, executive vice president and head of the adviser business for SEI Investments Co. of Oaks, Pa. “They force the adviser to outsource.”
Unlike Russell, SEI is “a single source of accountability” for managed accounts, Mr. Withrow added.
Michael Winnick, managing director of strategic partnerships and U.S. intermediary distribution at Russell, declined to comment on Mr. Withrow’s remarks.
“We wanted to align ourselves with our partners by putting our products on their platforms as opposed to potentially competing with them,” Mr. Winnick said.
The best examples of this alignment relate to two of Russell’s largest distributors — Northwestern Mutual Life Insurance Co. of Milwaukee and
Fidelity Investments of Boston — which urged Russell to abandon its own platform for one sponsored by Envestnet, he added.
Northwestern Mutual is Russell’s parent company.
“Managed-account providers who distribute through Fidelity are not required to sell through Envestnet,” said Fidelity spokesman Steve Austin.
But Jeff Strange, analyst for Cerulli & Associates Inc. of Boston, said that Russell is also likely outsourcing to Envestnet, because it has failed to replicate its success with mutual funds in the managed-accounts business.
“They’re letting someone more sophisticated in managed accounts do that business,” he said.
UMA needs
Of the $38 billion that Russell counts as retail assets, just $1.5 billion, or about 4%, is in managed accounts, according to Russell spokeswoman Jennifer Tice.
Russell’s platform is particularly unsophisticated with regard to
unified managed accounts, said Harry Clark, chief executive of Clark Capital Management Inc., a Philadelphia-based firm with $1.3 billion under management.
“I never thought of Russell as a competitor, but Envestnet is the big gorilla” for UMA platforms, he said.
Indeed, Russell recently got its managed-account services onto the platforms of
AIG Financial Advisors Inc. of Phoenix, Cambridge Investment Research Inc. of Fairfield, Iowa, and New York-based National Financial Partners Corp. on the strength of the move to Envestnet, Mr. Winnick added.
This casting of a wider net doesn’t worry large existing users of Russell, said Thomas H. Burkhart, chief executive of The Savant Group in San Francisco, which manages $990 million, $275 million of which is under advisement with Russell.
“They will never let a service model fall apart,” he said.
Kevin McIntosh, relationship manager for Greene Wealth Management LLC, a Russell client in Seattle that manages $425 million, said that he has some concerns about having to make “one extra phone call” if there is a problem related to managed accounts at Russell.
But he also likes that Russell managed accounts now appear on the same statement with accounts handled by managers at other firms.
Russell’s move is also greeted as good news by Richard Steiny, president of AssetMark Investment Services Inc., a Pleasanton, Calif.-based distributor of $20.5 billion of turnkey asset management products.
“It’s one less major competitor in the distribution business,” he said.
