BT forges Principal link

BT Funds Management and its new parent Principal Financial Group are keen to show the world a united front.

BT Funds Management and its new parent Principal Financial Group are keen to show the world a united front.

Senior executives from BTFM have been traversing the country over re-cent weeks to get to the united message to advisers, asset consult-ants and investors.

The catchphrase BTFM managing director Ian Martin keeps driving home is "synergies".

"It is great to have a parent who understands our business. It is a stimulus we have previously not had in the Bankers Trust environ-ment," he says.

Before the sale of BTFM to Principal, there was concern among advis-ers that its new owner may meddle with the group's highly successful distribution strategy. Martin says those fears have been allayed, and many dealer groups and research houses have since lifted their hold recommendations on BT funds.

Principal is keen to continue the investment and distribution strat-egy that has driven BT to the top of the retail funds management tree, in relation to funds under management. But at the same time, Principal hopes to replicate the success of its own strategies, par-ticularly when it comes to superannuation.

As Principal president Barry Griswell points out, Principal has the lion's share of the US 401(k) superannuation market for small to me-dium sized businesses. In fact, more than half of its $US84 billion under management is sourced from this market.

In Australia last week to take a closer look at BT's operations and the environment in which it operates, Griswell told Money Management the group had been looking for some time to translate its 401(k) suc-cess into Japan, Brazil, the UK and Australia. Its purchase of BT is by far the group's most significant investment to date.

Griswell says the lure of the Australian market for Principal is pri-marily compulsory superannuation.

"Without mandatory superannuation, the relatively small Australian market would not hold the same appeal of larger markets," he says.

Griswell says Sydney also may become the regional headquarters for Principal as it seeks to build its greenfield operations in Hong Kong and Indonesia.

BT's appeal to Principal was not merely its market presence or geo-graphical locations. Griswell says its intermediary distribution fo-cus complements that run by Principal.

"About 95 per cent of our 401(k) business comes through advisers, many of whom are independent, although unlike BT we have 1300 tied agents," he says.

While there may be differences in their respective distribution chan-nels, Martin is relieved to have a parent who has a similar business philosophy and a similar belief in the value of customer service and providing back-up to financial intermediaries.

He says these were some of the key elements of mutual understanding during the sale process. However, Martin also believes the media has been "naive" in its focus on the BT management team during the sale process.

"Funds management is a people business. What you are buying in an ac-quisition is the team. Of course you have to consult with that team when you are a prospective buyer of a business where goodwill is such a large component of the acquisition price," he says.

Looking ahead, the two groups will consider distribution arrangements in their respective markets. US investors may get another taste of BT's investment products while Australian advisers may see the intro-duction of Principal credit products such as mortgages.

To implement some of these plans, Principal's Carey Jury and David Fallow will remain on the ground in Australia at least in the medium term.