usinessman analyzing investment charts with laptop

U.S. asset managers are increasingly helping brokerage firms and advisors cull their product shelves, enabling them to devote more of their attention to client service and relationships, says Ian Russel, president and CEO of the Investment Industry Association of Canada (IIAC), in an IIAC newsletter published Monday.

Russell reports on panel discussions that took place at the annual meeting of the U.S. Securities Industry and Financial Markets Association (SIFMA) earlier this month.

As product lineups at U.S. dealer firms have grown ever broader and more diverse, large asset managers are taking on “an increasing important advisory role with broker-dealer firms in identifying investment products and constructing client portfolios for advisors, and streamlining/rationalizing the broker-dealer product shelf by eliminating mutual funds that have fallen short of performance expectations or failed to gather client assets,” Russell states.

For instance, U.S. brokerage giant Merrill Lynch recently cut its mutual fund offerings in half — from 3,600 possible funds to 1,800.

“In effect, this shelf rationalization process, now fairly-widespread across the investment industry, signals financial advisors are becoming more identified as ‘managers of managers’,” states Russell. Dealers and advisors are increasingly leaning on the big asset managers “to streamline the product shelf and recommend new high-quality investment products that meet the broker-dealer advice proposition,” he adds.

Dealers are also relying on the asset managers to “provide an ongoing assessment of the investment products offering, enabling the advisor to put greater focus on client relationships.”

To meet this need, the asset managers have built specialized teams to advise U.S. dealers “on platform rationalization and mutual fund product research,” he states.

“These insights are important not just to understand how the U.S. industry is evolving in rapidly changing markets, but to foreshadow the direction Canadian dealers might take in the coming year or two, given similar adjustments in investor behaviour in our markets,” states Russell.