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The Oaks, Pa.-based TAMP poached Scott Muench from the $10.7 trillion asset-manager and custodian, ending a nationwide search -- and Muench's 19-year streak at the Chicago-based giant
September 21, 2018 — 11:27 PM UTC by Oisin Breen
Brooke's Note: In the great convergence of institutional and retail, SEI has long had a solid foothold in both camps, amid the muddle of plan sponsors buying investment counsel in a post-DOL era. See: AssetMark records 'off the charts' year and SEI is 'right on track' after staggering $1-billion platform overhaul. Now, it sees a chance to go on the offensive with renewed purpose to win plan sponsors. With the DOL rule dead-on-arrival and firms like Fidelity stepping away from the table, SEI again sees a winning hand with its own ultra-bundled offerings. So it hired a star from Northern Trust who likes the cards SEI holds and is ready to play them.
SEI Investments Co. has hired long-time Northern Trust Asset Management executive Scott Muench and charged him with presiding over a plan to push deeper into the 401(k) market by going against a growing consensus that retirement products can be sold in pieces.
After nineteen years at Northern, Muench will now spearhead this against-the-grain drive for growth at the Oaks, Penn.-based TAMP. He'll be new regional director of defined contribution (DC) sales for its institutional group.
Currently SEI's DC business accounts for a paltry 18% of the $92 billion in assets under management by the institutional group, and this latest hire, with more in the offing, forms part of a growth push with a twist.
It doubles down on SEI's bundled approach to DC plans.
SEI's institutional group is a retirement, and healthcare benefits TAMP with 485 clients. Its parent firm, SEI Investments Co., is a publicly traded global investment processing, management and operations outsourcer that sells across the market to corporations, institutions, advisors and ultra-high-net-worth family offices. It has a market capitalization of $9.7 billion.
SEI has had its own defined contribution business for 20 of its 50 years, and has targeted DC as ripe for growth. It has upwards of 55 defined contribution clients, with more than $16.5 billion in assets. Of that sum, it's on-boarded $3 billion, or $500 million per quarter, since January 2016.
In contrast, firms like Boston's Fidelity Investments, or New York City 401(k) robo-TAMP Vestwell, seem on-trend with unbundled mix-and-match DC services. See: Fidelity Investments (explicitly) enters 401(k) advice game -- then Financial Engines' shares plummet despite its 'Mutual Fund Store' RIA winning Boeing and Ford accounts
Filling the void
Indeed, as others abandon the idea of an all-in-one outsourced DC package, SEI sees a chance for its TAMP to step-in and clean-up.
Playing for growth where others no longer tread is what led Muench to leave behind a 19-year association with Chicago asset-manager and custodian Northern Trust. See: As Aaron Schumm's 401(k) startup gets $8 million the FolioDynamix founder loves Vestwell's odd juxtaposition to Fidelity.
Unbundled plans have risen in popularity, owing to their greater flexibility, increased vendor accountability and the perception that bundled programs --in a post-Enron, post-DOL rule era of greater transparency and lower costs -- are mainly a means to sell investments.
The unbundled approach means administrative, record-keeping, custodial and money-management services are kept separate, often managed by different entities.
In an initiative titled The Path Forward, launched in Oct. 2010, Northern Trust analyzed the "ideal" DC plan and concluded that an unbundled service prove better for investors. In contrast, SEI touts the benefit of its bundled Master Trust, a comprehensive outsourced retirement service, albeit with governance maintained by an independent trustee.
SEI offered the chance to build-out something fresher that responds to the deeper need of plan sponsors to provide quality, Muench says.
“[I left] for the opportunity to help SEI build an important business … [and it] employs a market penetration and singular approach that is unparalleled in the marketplace,” he says.
The "singular" methodology Muench refers to is SEI's move toward one-bundle, product-and-pricing DC plans, albeit with customization available as plan B. SEI's other calling card, historically, is its staff of money-manager researchers, who inform decisions about managing managers.
Although Muench took up his position in July, his move was announced on Aug. 28, and he now works alongside an already established business development team in Chicago. It reports to 27-year SEI veteran Mike Cagnina, vice president and managing director of the institutional group.
Muench's appointment forms part of a strategic shift to grow SEI's involvement with plan sponsors and institutional investors, says Cagnina. “It's a very big part of SEI's strategic [institutional] growth … [as] the role of the plan sponsor continues to evolve and expectations continue to grow.”
The sales strategy, however, is simple: "Challenge the existing approach" of other vendors, says Muench.
In fact, the processes many plan sponsors currently employ are "broken" and "slow", which hampers their investments, he says. “Simple decisions are disruptive to their plans, and can take several quarters to make an impact … [SEI's] will prove to be a more appropriate model.”
At Northern Trust, Muench was responsible for business development in 20 states, and the creation of its sales strategy, with a particular focus on expanding the firms corporate and insurance footprint.
His appointment at SEI is the culmination of a “national” search that took in consultants, investment managers, outsourced CIOs, and plan sponsors. Muench was senior vice president and managing director for Northern Trust's client solutions group. He also held investment sales and client servicing positions.
Indeed, Muench was brought on for one specific reason, to ramp-up growth in SEI's defined contribution business, and his industry knowledge saw him leapfrog a raft of competitors for the position, says Cagnina. “His passion and energy … [was] unmatched relative to other highly qualified candidates.”
Tasked with growing SEI's business, one thing will prove difficult, insofar as actually ramping up growth is concerned. Plan sponsors might be gripped by “inertia," and prove reluctant to make changes, says Muench.
“The consultant-driven model, or the passively-managed-bundled menus, are well entrenched … [but] the drawbacks are significant, especially at the next market correction.”
SEI pursues an active management strategy, more particularly with regard to non-equity-based asset classes, a strategy the firm claims reduces risk.
Keeping risk low, especially for target-date funds which have "ratcheted up the risk each year," is becoming increasingly important, too, since many fund managers are pushing risk up too high, says Muench. "[This] places older participants, especially vulnerable to deep market corrections near retirement, in peril."
Inclusive of its subsidiaries, SEI manages $331 billion on behalf of its clients, and has $545 billion in assets under administration and $882 billion under its overall purview.
Perhaps it makes it more nimble for change than Northern Trust, which holds $8.1 trillion under its custody and $1.1 trillion under its management.
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