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Data & Research September 16, 2011
Asset Managers Not Supporting Needs of Distributors
Distributors are changing the way they do business, leading them to seek creative, new alternatives from asset managers, according to a report from kasina.
Reported by Rebecca Moore
However, distributors are frustrated, faced with an unresponsive
asset management industry that puts out a glut of undifferentiated, core
products painfully out of step with their changing needs, according to
kasina’s newest study Meeting the Needs of Tomorrow’s Distributors.
The disconnect has left distributors disaffected and disloyal to the
product providers they work with, at a time when the growing importance
of research and fee-based solutions should have precisely the opposite
impact, drawing distributors and asset managers into a tight
partnership.
According to kasina, as distributors evolve, asset managers need to adapt to distributors’ heightened expectations to stay competitive. “Three key trends are occurring at forward-thinking distributors: research teams are more powerful and controlling more flows, product needs are shifting, and distribution is globalizing,” said Steven Miyao, CEO and Founder of kasina, in a press release.
The changing distribution landscape presents a breadth of challenges for responsive asset managers. kasina estimates firms can expect aggregate net outflows of over $850 billion in mutual funds with U.S.-focused investment strategies if distributors reduce to a 60/40 (U.S./International) allocation from the current 78/22 allocation. Outflows will come from domestic core products, which have already seen $201.8 billion in net redemptions in the past four years. “Most products have cyclical flow patterns but because of the shifting dynamics at distributors, this is not likely the case for core U.S. equity,” stated Miyao.
According to kasina, as distributors evolve, asset managers need to adapt to distributors’ heightened expectations to stay competitive. “Three key trends are occurring at forward-thinking distributors: research teams are more powerful and controlling more flows, product needs are shifting, and distribution is globalizing,” said Steven Miyao, CEO and Founder of kasina, in a press release.
The changing distribution landscape presents a breadth of challenges for responsive asset managers. kasina estimates firms can expect aggregate net outflows of over $850 billion in mutual funds with U.S.-focused investment strategies if distributors reduce to a 60/40 (U.S./International) allocation from the current 78/22 allocation. Outflows will come from domestic core products, which have already seen $201.8 billion in net redemptions in the past four years. “Most products have cyclical flow patterns but because of the shifting dynamics at distributors, this is not likely the case for core U.S. equity,” stated Miyao.
The power of the home office will also increase in the next
five years. By 2015, 77% of adviser assets will be influenced by
distributor home offices. That's compared to the roughly 58% of assets
now influenced by home offices. But few asset managers are in a position
to leverage key opportunities presented from the changes occurring at
distributors.
Analysis of data garnered from a survey and
interviews with executives from nine of the industry's largest
distributors, including Ameriprise Financial, Commonwealth, Edward
Jones, LPL, Merrill Lynch, Morgan Stanley Smith Barney, Raymond James,
Charles Schwab, and UBS.
The 36-page report details best practices and recommendations for building loyalty among research analysts, aligning product development with distributor needs, and creating solutions around the needs of global distributors. kasina also introduces the kasina Gatekeeper Index (kGI), a quantitative assessment of how well asset managers are serving distributor needs.
For the full report, visit http://www.kasina.com/reports