Asset Managers Must Customize Distribution More Sharply - Study

Tom Burroughes

23 June 2020

Registered investment advisors’ assets have risen by almost 12 per cent over the last 10 years, faster than any other channel, such as broker-dealers. Changes highlight how asset managers must customize their approaches to win new business, a report said.

Changes in how people obtain wealth management advice and services also forces asset managers to think through their distribution strategy, because it is tough for firms to reach advisors in a scalable way because the market is so fragmented, .

The rise of fiduciary asset management has blurred the lines in retail wealth management, making it harder to tell different business models apart, the report continued.

“A sophisticated national/regional broker/dealer practice resembles, and offers the same services as, the largest wirehouse or independent RIA team,” Matt Belnap, senior analyst at Cerulli Associates, said.

The report said that the bank and independent RIA channels both represent “strong opportunities for asset managers to expand the distribution of their managed account offerings to fresh advisor markets”.

The bank channel has the smallest managed account assets under management (AuM) of any sponsor channel but its assets have grown nearly six-fold during the past decade, the report said.

“Bank home offices are also aggressively encouraging (and in some cases incentivizing) advisors to move client accounts, especially those high net worth accounts with more than $2 million, to their managed account platforms,” it said.

The new Regulation BI rule - as referred to above - has ruffled feathers: senior wealth management figures criticized the SEC rule as diverging form the existing fiduciary standard required of registered investment advisors.

The new regulatory regime deals with two phases in an investment story: First, before an advisor makes a recommendation to a client, and secondly, when the idea is executed. Regulation BI also imposes a duty on how people go about the transaction processes involved. The long-term payoff of this new regime is hopefully to improve the quality of the client/advisor relationship, advocates say.