“Distributors, who own the relationship with end investors, are gaining in power over asset managers who used to control the whole value chain,” commented Luca di Patrizi, Head of Intermediaries, Pictet Asset Management speaking at the ALFI Rentrée online conference on 16th September.
He said this process of “retailisation” is being driven by serving the end investor becoming the clear priority of the asset management industry. Consequently, the operators who own the relationship with the final client (i.e. distributors including B2B platforms) are able to act as gate keepers, defining the selection criteria, creating their own rules, and even launching their own funds.
Deep market intelligence required
Greater transparency due to regulation has driven this dynamic argues Klajdi Papadhimitri, Head of Oversight and Fund Distribution at Pictet Asset Services. “Regulation has led to better understanding of local rules, and better oversight of the distribution network. Mastering all related aspects is key to successful product distribution,” he said.
This is because building strategies that meet contemporary client expectations requires strong understanding of markets, expected costs, distribution channels, and more. “Some fund initiators have this in place, but others are pure portfolio managers for whom these details are not at all familiar,” Klajdi noted. “At Pictet Asset Services we understand this and are able to walk clients through this regulatory jungle in Europe and globally, enabling them to create a tailored distribution strategy.”)
Luca agrees that as an asset manager he sees the distribution chain becoming more transparent and crowded. “This is an unstoppable trend requested by the regulator, clients and society as a whole. It relates to fees, how we operate our portfolio, how we take and manage risk and more,” he said.
Digitalisation is key
Digitalisation is also part of this package. It is essential when dealing with diverse distributors and platforms in jurisdictions around the world, and communicating with clients and end investors. “Providing the required data in the right format to these counterparties is a key element for distribution,” Klajdi said. This means web-based submissions, digital reporting, digital flow monitoring, real time flow analytics and more.
The move to remote working during the pandemic has boosted the digitalisation process within Pictet. “Since the onset of the crisis, we joined forces with our marketing and our portfolio manager colleagues, and rapidly switched to a digital service set up,” Luca commented. “We have learned lessons that being transparent and on the front foot when it comes to communication has made a difference to maintaining client trust.”
The move to ESG will add even greater impetus on the need to understand where each investment sits on the sustainability spectrum, and how products would meet each client’s needs. As well, “investor education will be crucial and this could be a differentiator for marketing,” Luca noted, particularly related to the complexities of ESG.
“The move is towards a more direct distribution model with fewer intermediaries or intermediaries with an adapted model,” commented Klajdi. “With full real time transparency, disintermediated platforms will provide direct access to retail investors and for reasonable prices, a trend we are already seeing in some regions in the world.”