Over a dozen executives from national asset management firms, including BlackRock, Legg Mason, Eaton Vance, T. Rowe Price and State Street gathered on the afternoon of Sept. 29 in Manhattan to discuss the changes and challenges in third-party intermediary distribution of investment funds.
Over the course of the hour-long conversation, participants discussed how advisors are increasingly relying on others to make investment selections and asset allocation decisions, including home office managers, creators of third-party model portfolios and due diligence groups embedded in larger advisor teams.
Advisors are also increasingly turning to ETF strategists, turnkey asset management portfolios and so-called “robo” platforms, or algorithmically driven asset allocation portfolios.
That means traditional asset management firms are being squeezed; demands from distributors for revenue sharing are going to increase, though that will take different forms, for instance via access fees, data charges, educational programs or infrastructure support.
Meanwhile, asset managers’ overall revenues are falling as investors turn more broadly toward lower-cost index offerings.
As profit margins decrease and the distribution models evolve, these executives agreed that one place they’ll look for savings will be sales and marketing groups and their use of wholesalers.
Wholesaling, in fact, is undergoing a transformation, shifting away from pushing products to helping advisors devise solutions for clients. As such, asset management firms are putting more emphasis on their national account teams, supplemented by teams of investment specialists.