Vanguard to Market Mutual Funds to Reader's Digest Customers

The Reader's Digest Association Inc. and The Vanguard Group announced an alliance yesterday in which the financial firm will offer mutual funds and services to the publisher's U.S. customers.

Vanguard, Valley Forge, PA, is the nation's second-largest U.S.-based mutual fund firm and a leading provider of company-sponsored retirement plan services. Vanguard serves 15 million shareholder accounts and manages more than $570 billion in U.S. mutual fund assets.

The Reader's Digest Association, Pleasantville, NY, publishes Reader's Digest, the world's most widely read magazine. Reader's Digest has 12.5 million subscribers to its magazine and 45 million U.S. customers who buy other products, including books, CDs and videos.

Reader's Digest's U.S. customer base will be offered investment products and services, including Vanguard's low-cost mutual funds and variable annuity plan portfolios, along with brokerage, financial planning, asset management and trust services.

No financial terms were disclosed.

For Reader's Digest, this is the latest in a series of initiatives in financial services. The company has alliances through which credit, insurance and investment products are marketed in more than 30 countries. Its other alliances in the United States include deals with GE Capital Assurance; Torchmark Corp.; Pethealth Inc.; Physicians Mutual Insurance Co.; and First USA. Internationally, the growing partner list includes AIG, AXA, GE Sovac, ING, Manulife Financial and SCI International.

“We have been in the financial services business in the U.S. since 1999, and we have a number of alliances in categories such as credit cards and insurance, but we felt that mutual funds was the next category that we needed to complete the number of services that we are offering to our customers in terms of investment advice and investment products and services,” said Milton Pappas, director of U.S. financial services for Reader's Digest.

Usually, Reader's Digest's partners either send direct mail to the subscribers or Reader's Digest advertises the financial service company's products and services in its magazine. The company also offers its partners opportunities to be part of a co-branded financial services Web site. However, “the majority of advertising goes though direct mail,” Pappas said.

Though Pappas could not say how many of the company's 45 million U.S. customers receive direct mail, “we do direct mail modeling techniques, where we supplement our partners' data with all the data we have in our file to identify a targeted universe on a mailing-by-mailing basis.” Collectively, these mailings are sent about every three months, Pappas said.

Reader's Digest and Vanguard are still developing the type of marketing they will do, Pappas said. Market research is planned for this fall, as well as market testing to identify the market size and the types of products and services to be offered with the goal of a rollout in the first quarter of calendar 2002, he said.

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