Cerulli's European Fund Supermarkets report clearly demonstrates the changing distribution dynami...
Cerulli's European Fund Supermarkets report clearly demonstrates the changing distribution dynamics in the mutual fund industry.
As the role of banks declines in the distribution chain, that of financial advisers becomes fundamental, contrary to popular perception that fund supermarkets will eliminate the need for adviser distribution.
Since 1997, the proportion of funds under management attributed to bank distribution channels has fallen from 78% to 74%. IFA-attributed assets under management have risen from 6% to 8% throughout the Continent, the report says. It predicts IFAs will represent 11% of assets in Continental European fund management by 2005.
Fund supermarkets are also set to play a major role in this distribution. They will blend a wide range of retail-oriented packaged investment products, while maintaining a uniformity and simplicity of administration and record-keeping capabilities.
With understanding of how they should be used, and the services they offer, fund supermarkets could be of significant benefit to IFAs.
Many European IFAs have already recognised that the way they do business has altered. Use of the internet has made a commodity of the information transfer process and of the eventual transaction.
Now the way to differentiate themselves is through the quality and thoroughness of advice given.
To dispense advice in a manner that is both time and cost-effective, IFAs now need distribution support, and many are finding that in either a parent company or a fund supermarket.
Fund supermarkets should eventually make it easier for IFAs to offer a wide range of products, bundled with record keeping and administration.
Banks will undoubtedly move to counter this advance by IFAs. They will try to model their sales teams on the transparency and objectivity able to be achieved by IFAs.
However, investors are not ignorant of the fact that banks need to push their own barrows. IFAs should not miss the opportunity to differentiate themselves, using the support that fund supermarkets offer, and to emphasise the objectivity and quality of advice they are able to deliver.
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