By James Langton
(April 4 – 17:40 ET) – According to a new study from Boston’s Financial Research Corp., the mutual fund market is getting more competitive than ever, and in the process it’s evolving to be more responsive to the needs of investors.
The report from FRC focuses on the United States, but many of its observations can be applied to Canada, too, according to Credo Consulting Inc. “Mutual fund distribution strategies in the U.S. offer some of the industry’s best practices for Canadian firms to model.” says David Enns, president of Credo, FRC’s joint marketing partner in Canada.
“Their marketplace is more developed both in terms of household penetration of mutual funds and their relationship management practices. Firms on both sides of the border are focused on how best to meet the needs of individual investors in this ever increasingly competitive environment and this study clearly highlights some key trends worth bringing to Canada,” adds Enns.
FRC says a new competitive landscape is evolving in the U.S. It identifies four major trends that are reshaping the traditional environment for fund manufacturers and distributors:
- the importance of key account management;
- customized wholesaling strategies;
- the growth in valued-added services; and
- reciprocal distribution.
It says that, “Firms are recognizing that top distributors must be approached by an integrated team under the direction of single relationship manager instead of by individuals working in channel silos.”
The report notes that fund companies are being pushed to offer more valued-added services. “As mutual funds are increasingly commodity products, the traditional product-push strategy has been replaced with a collaborative one where fund wholesalers help advisors grow their businesses and serve investors. Firms are moving away from ‘touchy-feely stuff’ to programs that give quantifiable results where manufacturers are expected to deliver tactical approaches that advisors can immediately implement.”
The new competitive environment is also creating more aggressive alliance strategies. “Exchanging access to distribution for investment management assignments has taken the alliance trend to a whole new level, providing new products to many distributors that its clients didn’t have access to previously. These arrangements are likely to exponentially increase in numbers, creating enhanced opportunity for advisors and investors alike.”
“In this hyper-competitive climate, fund manufacturers are going to have to be more creative and more responsive to the needs of distributors and their clients in order to be successful,” says Gavin Quill, director of research studies at FRC.
“Manufacturers will have to have a firm grasp of the costs and productivity to reach various investor segments and market products through different channels. Investors are increasingly using advisors to guide them through the maze of complex products and expanding choices. The winners will be those manufacturers that can best work with distributors to assist the distributor’s advisors in enhancing their clients’ experiences.”