When it came to American Funds, industry insiders and advisors always said that based on their 30-year history, they had a different model that few if any could follow. It seems that now, especially after two years of significant outflow (which has continued in 2013), American Funds is coming back to the industry, adopting services and features most of their competitors have in place.
For example, the firm will be offering a 60/40 proprietary/nonproprietary split in the RecordKeeper Direct product for the first time; there are plans to provide local education support to participants; and they teamed up with Wilshire to offer fiduciary services.
Though the reported $40 billion under management in their record keeping group is relatively modest, American Funds manages 35,000 DC plans and has a greater reach with their DCIO group, which makes them a big player. And advisors are comfortable with them, as evidenced by a recent Cogent study in which they received top scores.
With insurance companies dominating the small and micro markets, it’s important that there are some alternatives from mutual fund companies like American Funds. Along with Fidelity, they are the lone holdovers from 10 years ago, when mutual fund companies were real small market players. Firms like American Century, Columbia, Invesco, Lord Abbett, Franklin Templeton, Goldman Sachs, Oppenheimer and Pioneer exited the record keeping business to focus on the DCIO market; MFS sold its business to The Hartford (now MassMutual); and Putnam moved up market.
Choice is good — as are the recent moves by American Funds to be more responsive to market needs.
