Electronic platforms are becoming a vital channel for global funds distribution. While those are not new to the financial industry, EY claims that asset managers have just been the slowest to adapt.
In the first publication of their series on Connectivity “Connectivity - The EY global distribution review”, Ernst & Young claims that the stage is set for more electronic distribution of investment funds. Fewer asset managers can afford to rely on distribution models from before the financial crisis. Asset managers must be more innovative and abandon the model of personal intermediation as commission-based sales are becoming more regulated.
For investment fund distribution, electronic platforms perform an exchange of information backed up by a payment system. While such systems are used for many assets in the financial industry, asset managers were slowest to introduce them, the report says. After the financial crisis, investors were disappointed by the performance of their fund investments. Now, investors are increasingly well informed about prices and products, have far greater access to financial information and are now comfortably making financial decision on their own.
Predicting the future, EY expects a further growth in electronic platforms in the distribution of investment fund. Those platforms need to segment their market and target a specific segment. Moreover, national behavioural characteristics remain in place in the asset management industry. Therefore, electronic platforms are becoming more diversified.
Using a multichannel strategy, asset managers will need to decide on which channels to choose to inform investors. For platform operators, a fierce competition among platforms will emerge. While platforms offer similar products to investors, the one with the best financial education, learning experience and detailed attention will win the competition among them.