[Industry disruptions bring an urgency to break the established chains of business inertia—of continuing to do what we do because that is how we have always done it. Disruption forces challenging questions and a rethinking of status quo approaches, processes, structures, and mindsets because new conditions and operating environments now demand it. The truism is that while unsettling, there always is an opportunity in the uncertainty and complexity of change. It is the silver lining in the storm and the catalyst for industry evolving innovation.
How this dynamic is being applied to the decades old investment products distribution system makes a very compelling case study of financial services business innovation—of creating an exponential jump for multiple stakeholders away from entrenched ways of doing business.
This was brought to my attention when speaking with new Institute member Brian Moran, CEO and founder of FLX Distribution—a financial technology company that is the first Resource and Asset Management Platform (RAMP) bringing together asset managers, distribution professionals and financial advisors in a unique way. FLX was recently recognized with the 2020 Money Management Institute/Barron’s Disruption Award for groundbreaking technology and process that “will fundamentally alter the future delivery of advisory solutions.” I took the opportunity to ask Brian questions to better understand how he and his firm are creating a new tech-enabled ecosystem and revolutionizing the distribution experience that occurs between asset managers, distribution professionals, and wealth management advisors.]
Bill Hortz: What was your thinking behind starting FLX Distribution?
Brian Moran: Most of my career has been in investment distribution in a variety of different roles from being a wholesaler to a national account manager to leading distribution teams. A key insight I had was in late 2018 when I saw the opportunity to potentially introduce a new way to do business in distributing asset management products and services.
One of the components of this thinking was that we could take the traditional distribution marketing structure of investment product manufacturers—hiring wholesalers to go see advisors and gatekeepers, interacting with them—and transform this extensive and costly internal infrastructure by applying concepts from the “sharing economy”. Could we bring this whole structure and process into a single technology platform with new ways to operate and engage asset managers, distribution professionals, and wealth management advisors with each other? That was what kicked off this initiative of creating the next generation of asset management distribution.
Hortz: What were your first steps and the ongoing process you followed in developing your solutions for those different stakeholders?
Moran: Our first efforts were on developing a technology platform that had distribution as its inaugural focus. That is where we brought together investment manufacturing (asset managers, mutual funds, separately managed accounts, alternatives, you name it) and we designed a way to match them on this platform with a broad array of specialized resources to help asset managers build or design their very own specific distribution solution based upon where they are in their lifecycle and sales strategy needs.
In 2020, we further iterated the design of the platform by engaging with hundreds of prospects, colleagues, and, especially, skeptics. We learned that the ideal distribution business model is one that addresses the industry’s most pressing needs of being more cost-effective, adaptable, and flexible than ever before. In this light, FLX created a new concept DARP—Distribution At a Reasonable Price—to provide our partners with that access, flexibility, and scale.
In order to deliver DARP, we more deeply explored and leveraged the concepts of the “sharing economy” to offer a better way to implement distribution in the asset management industry. We focused on creating a platform and organization driven by data, technology, and human connections to creatively empower a more flexible “sharing” of expertise and resources among platform members on a when needed basis. In the development process, we determined that it really does takes a village to innovate effectively in today’s operating environment of accelerating rates of change.
Hortz: Can you further explain the tangible benefits from the platform for asset managers?
Moran: We believe that conventional thinking and rationalization will not solve the necessity of growth in the face of hyper rates of industry change. We saw though how our new concept of Distribution At a Reasonable Price (DARP) was achievable due to the platform’s gig economy structure with similarities to how companies such as Uber, Match, Airbnb, and LinkedIn operate and engage. Powered by a combination of proprietary tech developments and a stack of leading software providers, we created a seamless exchange for delivering data, media, services, solutions, strategy, and technology.
The FLX platform ultimately provides three key things every asset manager needs to succeed:
• Flexibility – empowering an asset manager to optimally create and align a tailored distribution solution for their firm. The distribution solution can be quickly flexed up or down based upon channel, strategy, product, and/or market conditions.
• Scale – providing an asset manager with a full team of distribution professionals for 25%-75% of the fixed costs relative to a team built in-house. FLX Distribution can do this by scaling across critical job functions.
• Access – offering asset managers unparalleled access to investment decision makers, experienced distribution professionals, marketing/PR experts, data management and analytics.
Asset Managers decide on flexible, cost-effective, and sustainable distribution solutions by completing each step of our Journey Towards Distribution path, which we develop specifically for each client. It is focused on understanding an asset manager’s existing business plans, current distribution capabilities, intermediary experience, investment capabilities, and ultimate sales and marketing goals to create a comprehensive and modular distribution solution.