• Industry: Financial Services, Investments
  • Type: Business and industry issue
  • Date: 3/21/2013

Evolving distribution models 

When asked about the various forces of change currently acting on distribution models in the industry, the executives we spoke with provided a number of eye-opening insights and predictions. Perhaps the most shocking assertion from the CEOs we spoke with was that between 20 and 30 percent of the people and companies in the asset industry today will virtually disappear over the course of the next decade.

Our group of executives also said they anticipated relentless pressure on margins, a trend they don’t see going away anytime soon. Among the other potential ‘forces of change’ they discussed were a shift to lower-priced products, the continuing wave of regulatory change and the stark realization that, for the time being at least, market volatility is the new norm.

The move to solutions

While there are certainly storm clouds on the horizon relating to the challenges associated with factors such as scalability, complexity and hidden costs, many industry players remain optimistic and focused on working toward solutions that will help position them for profitability and success in the future. For instance, asset managers say they’re looking for deeper and longer-term client relationships. As a result, they say there is currently significantly more effort being invested in extending the scope and duration of relationships with existing clients. Retail intermediaries, on the other hand, say simplification is the key and that they’re seeking simple, outcome-oriented product sets that they can then sell, in turn, to their end customers.

Leading players reshaping their distribution models and strategies

As part of the ongoing evolution of the industry landscape, many providers are opting to make strategic changes to their distribution models. For example, in order to better maintain intimacy with local clients, some providers are refining their business models to help ensure what they consider to be a more appropriate balance between global and local operating structures. Others, perhaps looking to move up the value chain in the eyes of their clients, are putting an increased focus on what they consider to be ‘solutions’ rather than simply ‘products’.

Another common theme mentioned by a number of executives was the need to ‘manage for margin’ by reducing complexity wherever possible in the value chain. But by far, the number one issue of importance according to these executives was being able to provide existing clients with better service. To that end, more and more sales forces are finding themselves conducting ‘structured selling’ and investing in getting to know their client companies through the coordinated pursuit of ongoing dialogue with clients.