Private, retail banks set stage for distribution growth – Fund Forum

Research by Cerulli Associates presented at the Fund Forum conference in Monaco today has clearly shown retail distribution channels such as private and retail banks exhibit the strongest potential for growth in Europe’s core countries this year.

However, the research also pointed to a concerning gap between what end-investors want in fund products, and what those intermediaries helping them feel is important.

Shiv Taneja, Cerulli managing director, told delegates the strongest growth potential in Germany, Spain and Italy was retail banks, while for funds sold in more than two European jurisdictions, it is private banks. France stood apart, where funds of funds had the strongest growth potential.

It was clear however that as end clients buy funds, or have them chosen on their behalf, their wishes diverge markedly from those providing service to them.
When fund selectors choose funds, Taneja said it was unsurprising that in today’s volatile markets, brand was the most important consideration, followed by product quality and sales and account management. Brand was one of the top four considerations for this group each crisis year since 2008, he added. One delegate said it was important to have the “Coca Colas” of this world on offer, even if a client also wanted to buy another brand.

For the end client, however, performance and fees were by far the top two criteria in viewing a fund. In a study of over 4,000 affluent end invstors across major European countries, performance was cited first by between 14% and 17% of respondents, while fees were cited by between about 12% and 16% – the next most prevalent criterion.

Taneja said the issue of fees would rise as the effects of Great Britain’s retail distribution review, and its change to the fee model, were felt further afield.
He said it was important for end investors to make known their needs and likes (and dislikes) about products, and not be passively told by intermediaries.

However, he added the gravitation towards the largest managers was still visible in Europe.

The top 20 managers accounted for 53% of assets and the top five held about one in every five euros invested in funds. The top 10 managers in Europe took in €72bn net new business last year, while the rest lost €160.2bn. This was similar to 2008, when the top 10 absorbed €91.3bn more business while all smaller rivals suffered aggregate net outflows of €432bn.

Taneja added it was important for the asset management industry and intermediaries to keep, or win back, the trust of end investors, after a crisis since 2007 as the European industry has shrunk by 5.5%.

 

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