RETHINKING DISTRIBUTION

Executive Summary

The key drivers of change we have observed in the past few years are far frombeing a temporary phenomenon.These trends are set to cause a significant shift within the asset management industry. Each of these trends and their effects are distinctive in nature but the implications for asset managers are to a certain extent similar. Our research anticipates the following developments with the industry in the future:

Agreement” allowing the distribution of European funds in selected emerging markets and vice versa. At minimum an inclusive process should be considered, where the views, needs and concerns of emerging market regulators find due consideration in developing new European fund regulations.

The risk of pension savings will not be fully transferred to the individual

SEGREGATION BETWEEN PURE DISTRIBUTION AND PURE ADVICE

European governments, particularly, will impose minimum return requirements on pension savings products. Asset managers will face challenges in endorsing these risks, or part of them, and therefore to provide such products independently. They will be forced to partner with insurance companies and other providers to bank on this opportunity.

We believe increased regulation at the point of sale and investor scrutiny will lead to a segregation between pure advice and pure distribution. The asset management industry, especially in Anglo-Saxon countries, will move towards a new paradigm where, after receiving advice, the investor will execute an order via a trading platform or an intermediary. However, this evolutionmay be slow in Continental Europewhere distributors, as they keep their current commission charging structures, may be encouraged to further integrate in-house product manufacturing to better control costs and risks of distributing funds to a still captive clientele.

more than a Regulatory level playing field is needed to compete against substitute products

The regulatory level playing field which is set to partially materialise in the near future through PRIPs (Packeged Retail Investment Products) will not result in a significant increase of competitiveness of the asset management industry. The other ingredients required from the asset management industry are better time to market, an improved product fit in terms of investor needs (such as capital protection and outcome orientation) as well as increasing the attractiveness of mutual funds for banking and insurance distributors.

Reciprocity between Europe and SELECTED Emerging Markets key to long term growth

To avoid marginalisation and loss of opportunity in playing a significant role in emerging markets, the European asset management industry should push for a “Reciprocity

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