Asset managers go head to head with distributors


14-10-2016

Angelique Schouten, CEO Ohpen UK: "firms should not fear having a multi-channel distribution approach".

Asset managers are increasingly willing to enter the direct-to-consumer sales market, ignoring the risk of upsetting distributors that also vie for investor attention.

Traditionally asset managers have steered clear of direct distribution efforts so as not to alienate their distribution partners, such as banks or independent financial advisers.
However, experts say this is changing as the relationship between distributors and asset managers comes under increasing strain.

Amin Rajan, chief executive officer of consultancy Create-Research, says distributors now wield “enormous power” over manufacturers and are increasingly asking for a larger slice of fund fees.  Asset managers “feel they are not getting their fair share” and are therefore more open to the idea of expanding into the D2C market, says Mr Rajan.

In addition, as some banks and adviser firms are now selling their own-branded funds, asset managers are questioning “how they are going to maintain their share of the value chain”, says Jeremy Fawcett, head of direct at Platforum.

“If you’re an asset manager and you’re completely beholden to your distributor, if it starts pushing its products instead of yours, it means there’s another layer of competition,” says Mr Fawcett.  “This pushes asset managers further in the direction of direct distribution.”
Several asset managers have started building out their direct businesses by improving their digital capabilities, encouraged by changing investor habits.

Columbia Threadneedle is preparing to soft-launch a mobile app selling its own funds. Aberdeen Asset Management is also developing a mobile application that would allow users to buy its funds directly, Ignites Europe has learnt.

Meanwhile M&G is planning to launch an online service for “new and existing” clients who invest directly in its individual savings account products.

Monique van Wensem, head of retail marketing and sales at Robeco, which operates an online D2C business in the Netherlands, says fund houses venturing into this area for the first time are understandably more fearful than existing D2C players about cannibalising their existing distribution.

But Robeco’s experience has shown that having a D2C business can support an asset manager’s wholesale business, she says.

“We think both segments can leverage on each other,” says Ms van Wensem. For example Robeco’s brand-building efforts in the D2C space help to boost its profile among fund selectors and retail distributors.

Multi-Channel

Angelique Schouten, CEO Ohpen UK

Angelique Schouten, CEO of platform technology provider Ohpen UK says firms should not fear having a multi-channel distribution approach.

“If you look at distributors or independent financial advisers, they are servicing a specific group of investors who want help or advice,” she says.

“But there are also clients who don’t want advice.”

Mr Fawcett adds: “If you’re going to run a campaign overtly poaching your distributors’ customers, that’s clearly going to get you in trouble with your intermediated distribution. “But if you identify a specific client base for direct distribution and then address it in a way that is specific to that segment, it’s much more defensible.”

Ms Schouten notes that it is “striking” that asset managers have not embraced multiple distribution channels when virtually “every other industry in the world” operates in this way.

Other experts say distributors have little to fear from asset managers going direct as this client segment is likely to remain a marginal part of their business.

Mauro Baratta, joint CEO of research firm MackayWilliams, says: “The D2C market will have a limited appeal to the mass market in the short and medium term. “Distributors can still sleep easily.”

Mr Baratta adds that he does not believe there will be a “rush of fund managers launching their own fund sale apps”.

Only the large asset managers or ones with the support of a parent bank will be prepared to venture into an area that is expensive to finance but may not yield very much immediate business, he says.

According to Mr Baratta, for these firms the rationale for developing in the online D2C space is that it may bear fruit over the long term. Mr Baratta says: “Asset managers are always telling the end investor you’ve got to think long term. “Now they themselves have to think long term – by developing their digital distribution capabilities they may have an advantage over companies that join late.” Mr Rajan agrees that the D2C market may be a long-term rather than a short-term opportunity for asset managers.

“The potential is huge on a 10-year view – the early trailblazers will soon be joined by others,” says Mr Rajan.

Article written by Siobhan Reading for Ignites Europe

Copyright 2017, Money-Media Inc. All rights reserved. Redistributed with permission. Unauthorised copying or redistribution prohibited by law.