RETHINKING DISTRIBUTION

Conclusion In a future where competition is set to increase across all accessible markets, segments and sectors, successful distribution will depend on getting the basics right. The key will not lie in developing exotic products which sound trendy but rather to be tuned to the pulse of the customer andmarkets. The success of the European asset management industry in emerging markets will be dependent not only on a comprehensive understanding of the local specificities but also local presence, and promotion built on the fundamentals of solid product performance. In specific local markets, partnership with local knowledge will be crucial in overcoming regulatory and cultural barriers. The European asset management industry is currently at a crossroads. Should the industry allow for distribution reciprocity, or at least an interactive dialogue with selected emergingmarket regulators, when developing future regulations? Or should the industry risk the threat of losing the dominance of UCITS distribution in these markets in the long term future? Similar relationship building qualities will be in high demand with investors. While future investors are likely to be more challenging and skeptical of financial institutions in general, good personal relationships will rise above these reservations and can create a resilient client base who are more likely to remain with a trusted adviser through a downturn. To gain such a client base, product manufacturers will have to work closely with distributors in order to create products optimised for specific channels and market segments. While returns will obviously be a major factor, strong client relationships cannot be underestimated.

A sector with less surety is the area of pensions. While it is certainly technically possible for the assetmanagement industry to create products in partnership with insurance entities that will better satisfy the requirements of mass retirement income, much depends on the development of government policy in the area. However, it appears likely that the trend toward more and more private schemes is inevitable, and these new flows should open the market sufficiently to allow the asset management industry to be proactive in offering solutions, rather than being reactive. Similarly, the competition with substitute products also has the potential to be market changing. While a more level playing field between substitute products and traditional investment products may occur, a greater challenge would appear to be achieving the increased specialisation which can deliver on the wants and needs of a more objective oriented market. The asset management industry will need to be willing to employ efficiency and innovation to create products that can exploit these opportunities. Higher sophistication of advisers, greater transparency for the client and increased interaction with customers will also be the factors of success in a world where investors will rely more on social media to discuss and decide on financial matters. Even if institutions rely on social media for nothing more than brand protection, they will need to become adept in its use. Although there is no silver bullet for success, the concepts discussed in our scenarios should equip asset managers and fund distributors with the main ideas necessary to offer their investors a new experience of the fund industry. This new experience can be summarised in four main points:

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