The forces that shape retail fund distribution, be ready for disruption or business as usual ?

Abstract

Fund distribution is currently at a turning point. As several necessary conditions to experience an unprecedented shift seem to gather, this dissertation will try to highlight the trends and forces that will likely have unsettling effects the fund distribution, as well as to have a clear understanding of their potential impacts on all parties involved, from the distributor and financial advisor, right down to the end-investor. The forces that we will cover in this dissertation are classified into four different chapters, every chapter being dedicated to one key driver of change that have the potential to bring disruption to the industry. The first chapter, dedicated to the analysis of the changing investor profile and behaviour, will first focus on how the population is going to evolve in the years to come as well as the implications this could have on the fund industry. The importance of cross-border distribution and the so-called digitisation of everything, characterised by the emergence of a new generation fully embracing digital tools, are also exposed. This increasing importance of digital tools in the fund industry already seems to have been understood by some actors in the distribution process. The second chapter therefore covers a more in-depth look at the new technologies and infrastructures on the distribution-side of the fund industry. In the third chapter, the importance of investor protection and transparency through two different (yet complementary) directives that will become effective in the years to come at a European level are explained. The impacts of the requirements of these incoming directives are also highlighted. Finally, the last chapter is dedicated to a more in-depth analysis of the most disrupting rule of the MiFID directive: the so-called “ban on inducements”. In order to clearly assess its potential future impact, we will analyse other existing similar national regulations that could prove to be insightful regarding the European landscape. With a clearer understanding of these forces, we will then also look at how best to adapt to the new disrupted environment, using a combination of strategies and tactics to increase participants’ likelihood of finding themselves among the fund distribution industry’s winners.