RETHINKING DISTRIBUTION

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Scenario Planning Distribution Models

Figure 14

Continental European model While investors remain sticky to their distributor, regulatory pressure at the point of sale and at national levels will result in higher liability for distributors who may favour selling their own products to better control increased costs and risks. This would lead to players increasingly concentrating asset management, distribution and advice activities within their own group rather than sourcing these from various players.

Anglo-Saxon model

With higher regulation at the point of sale and less captive clientele, distribution will become more complex with a segregation of advice, distribution and asset management. There will also be a growing number of gatekeepers between AM and distributors (wrap platform, distributors’fund selection unit…)

Regulation at the point of sale High Low

Increased competition

Business as usual

Current distribution models will prevail given that regulation at the point of sale will not increase and distributors will still benefit from a captive clientele.

Although there will be no increase in regulation at the point of sale, lower captive clientele will lead to investors increasingly evaluating and comparing products and advice offers to meet their needs. This will result in a higher competition between distributors, as well as AMs, to gain market share.

Captive clientele

Low

High

Regulation and changes in customer behaviour have the potential to disrupt current distributionmodels. While a trend towards open-architecture and the separation of manufacturing and distribution was announced several years ago, there are still different degrees of openness in Europe. Open-architecture means that the fund manufacturer and distributor belong to different groups but many large European banks are still debating the choice of selling their ownmanufactured products or those from third parties.

In fact, any move will depend highly upon a clear change in regulation at the point of sale and/or client captivity with their distributor or adviser. The axes for our scenario planning represent the degree of regulation at the point of sale versus the clientele captivity, where we attempt to chart the likely outcome of this fusion of established captive clientele and further liabilities on distributors (see figure 14).

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