Prudential Investments Begins Breaking Proprietary Mold

Prudential Investments is breaking the captive sales force model long used by its insurance company parent and Prudential Securities.The asset management unit, which now has responsibility for all managed products formerly run separately by the insurance and securities businesses, has hired teams of wholesalers in a push to market Prudential products through other firms and independent RIAs."This

Prudential Investments is breaking the captive sales force model long used by its insurance company parent and Prudential Securities.

The asset management unit, which now has responsibility for all managed products formerly run separately by the insurance and securities businesses, has hired teams of wholesalers in a push to market Prudential products through other firms and independent RIAs.

"This is part of Prudential Insurance's broader strategy to reach consumers through their adviser of choice," says Marcia Beck, head of the Prudential Investments Advisory Group.

The advisory group debuted in July 1998. It has inked 340 selling agreements with independent broker/dealers to market Prudential mutual funds and is negotiating agreements with regional firms, Beck says.

In November, the group began its RIA push, joining the Schwab Institutional Mutual Fund OneSource Service. Seven mutual funds now are available without loads to the more than 5,300 RIAs who use the Schwab platform: Prudential World Fund/International Stock Series, Prudential Equity Fund, Prudential Equity Income Fund, Prudential Jennison Growth Fund, Prudential Europe Growth Fund, Prudential Small Company Value Fund, and Prudential 20/20/Focus Fund.

"We're in negotiations with the Fidelity, Jack White and Waterhouse Securities RIA platforms," Beck says. "We're just going wherever the RIAs are."

Prudential's advisory group is also eyeing distribution agreements with insurance companies that sponsor 401(k) plans and wrap-fee programs sponsored by other brokerage firms. No agreements are yet in the works, Beck says.

Prudential has hired 20 wholesalers, split into two teams to focus on broker/ dealer and RIA distribution. Beck expects to hire another 20 this year.

This month, Prudential will add its variable annuities products and two proprietary wrap-fee programs to its outside marketing effort.

"More investors have access for the first time to certain managers owned by or affiliated with Prudential, such as Jennison and Merkatur Asset Management," Beck says.

That access concerns some Prudential Securities brokers. "My initial reaction is, wait a minute, if we have something really good, now everyone else has it and it takes off our competitive edge," says a long-time Prudential rep.

Other reps see outside distribution as a nonevent. "The average broker here doesn't sell much in-house funds, so if someone else wants to sell them, more power to them," says a Prudential broker on the East Coast.

Long-term brokers admit it's probably a good strategy. "It gives us better distribution and more recognition," says a Florida Prudential rep. Even the long-time Prudential rep agrees: "Theoretically, better distribution will bring the internal costs of the products down, which will be a plus for mutual fund shareholders. That ought to help the funds' performance and will put our presence on the map."

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