[For years asset managers have discussed the need to transition to a “next-generation” distribution model to offset industry-wide margin declines. Many have been slow to adopt more advanced data, analytics and technology capabilities, but the pandemic and the pursuant economic disruption greatly impacted and pushed asset management firms into modernizing their thinking and propelling them to take new strategic critical actions.
A recent asset management industry research study by Market-Bridge entitled “Next-Generation Distribution Enablement—An Outlook for 2022” was launched to understand where asset management companies are driving innovation, investing and developing new distribution priorities, as well as taking into account the needs and expectations of financial advisors. We reached out to Institute member Bill Sheldon, SVP of MarketBridge, to dig further into their recent research study.]
Bill Hortz: Can you walk us through the why and how behind developing and conducting your research on next-gen asset management distribution?
Bill Sheldon: First, as to the why: We were seeing a number of “classic” go-to-market issues emerge in the industry which, based on our work in other industries like tech, suggest the industry is ready for fundamental and widespread changes to the distribution model―which candidly has not changed significantly in many years.
These issues include continued margin compression, dramatic changes in customer buying behavior, the emergence of disruptive new fintech entrants, and a continued reliance and attachment to a “feet-on-the-street” coverage model. There are also broader market trends at work like the ongoing generational transfer of wealth and continued concentration within the industry—and then you throw in a global pandemic. Clearly, this forced firms to adapt and make rapid changes in their engagement model as the industry was forced to go virtual overnight.
We were interested in how firms will respond post-pandemic. Will they return to their old ways, or will they take advantage of the pandemic reset to truly transform to a data-driven “next-gen” distribution model? One that better responds to client needs, generates greater scalability for their businesses and takes full advantage of the advances in data, analytics, and technology to truly transform the customer experience in the industry. One industry executive we spoke with captured it well―“Can we take advantage of this opportunity to move from 'interruption-based' coverage to 'invitation-based' coverage?”
As to the how: We first conducted a survey of 100 financial advisors to probe how their needs and behaviors had changed during the course of the pandemic. More importantly, we probed on how they expect those to change post-pandemic and asked them how they would like to interact with their asset management partners moving forward.
We then surveyed 35+ asset managers across the AUM spectrum to get their perception of how well they were doing in enabling their go-to-market resources to identify and support those needs, and what their priorities and plans were for making a transition to next-gen distribution and distribution enablement.
Hortz: What are asset managers reporting as to where they feel they are in their current state?
Sheldon: We actually started the survey with two key questions: “How would you classify your current distribution enablement strategy in terms of overall effectiveness and impact on sales productivity?” and “How would you rank your client experience in the intermediary, institutional and retail channels (to the extent that they participated in those channels)?"
We were a bit surprised that nearly two-thirds of asset managers self-assessed their current strategy as very (45%) or extremely (19%) effective. Firms under $100B AUM were actually a bit more bullish, with 30% of respondents in that category saying they were extremely effective, while firms over $250B AUM were less so, with only 8% suggesting they were extremely effective. There is clearly an issue of scale at work here.
With regard to customer experience (CX), the Intermediary channel scored lowest, with 46% saying they provided a “great” CX there vs. 63% in the institutional channel and 68% in the retail channel. Interestingly firms under $100B ranked their intermediary CX much higher. Mid-sized firms ranked it the lowest, and larger firms ranked it higher, though not as high as the small firms.