With hundreds of thousands of financial advisors out there to pitch to, and the number getting ever larger, distribution for fund managers is getting ever more complex. Though, at the same time, they think (or hope) that advances in technology, Big Data and analytics will make this process easier in the future.
On the panel on "Fund Distribution: Evolving Opportunities and Challenges" at the ICI 2014 GMM", George Riedel
, head of financial institutions and T. Rowe Price Associates
, said that, first and foremost, it's important to make a dent at warehouses' and other advisors' research departments.
"When I joined in 1998, we didn't have any wholesaler. I was the wholesaler. As we started trying to bring the strengths of T. Rowe to intermediaries, we had to start with research," he said. The company then went out to the biggest financial advisors, insurance companies, banks and broacher dealers and started the conversation with them in research.
When it comes to distribution, Riedel said, "I think of the three C's: creativity, collaboration and consultation. If you can do these things well on a consistent basis, you'll be successful."
, head of global distribution at Putnam Investments
agreed that "the solution since 1998 has been a powerful one." He agreed that successful distribution would have to begin in research, but "you still have to talk to the advisors at the end of the day," he said, adding that lacking relationships there will make it tougher to get in the door, still.
, president at Eaton Vance Distributors
also said that "the demands of the research department are very high. The big issue with them is that they don't want any surprises," he said. If a portfolio manager leaves, for example, they want to hear about it firsthand from the firm, not read it in the press or hear it through word-of-mouth.
Another challenge is getting new products to investors and advisors. The managers often think about how long they should incubate new strategies with seed money, before taking them out to market. "A lot of us have launched new products and we have to decide whether it's going to run for a year or three years with seed money," Witkos said. "We're thinking about that all the time.
All of the speakers noted that they expect distribution models to change with the onset of more technological advances and virtual communication. "Mobile will be a big way to interact with advisors and investors, a big change is coming," said T. Rowe's Riedel.
"Five years from now, wholesaling will be different. There will be less wholesalers on the ground, but the need for quicker information and expectations will be higher," said Putnam's Connolly. A virtual model of wholesaling will emerge, where "We'll talk to people however they want to be talked to." The shift in generations will play a part as well, the speaker noted. "Our kids won't want to be advised in the same way, but they will want the same level of content and information or more," Connolly said.
Analytics on target markets will also become more prominent and better, said Eaton Vance's Witkos. "We're working with a consulting firm that's helping us triage how these advisors go to market," he said. And Connolly added that you need to know the business model of the firms you're pitching to. "You ned to get as much intelligence as possible. If you can get enough info to dissect that, you'll be better off." No one can cover 300,000 advisors face to face, he noted. "This is where Big Data comes in."
T. Rowe's Riedel said his firm is working on building behavioral analytics to try to predict which kinds of advisors or investors would be more likely to buy their products. "From our perspective, predictive analytics is the holy grail," he said. "Where we'd be grabbing data from multiple points and putting that through a middle office system. I might not know this advisor, for example, but I know that they bought this product and that product, so it'll make them more likely to buy our product."
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