Distributors want more fund transparency
There are several areas where product gatekeepers at private banks feel fund managers could do – and in many cases are doing – a better job when it comes to sales and servicing, as reported recently .
Another area where some distributors would like to see improvement is related to transparency about what has driven fund returns – or lack of them.
Richard Mak, Asia head of advisory services at Swiss firm Pictet Wealth Management, said: “We expect more disclosure on performance attribution by asset allocation and security selection.”
It is important to share with investors the key contributors to the fund’s outperformance, as well as underperformance, noted Hong Kong-based Mak. “The better the investors understand the source of alpha or the performance drag, the more comfortable they are.”
Mak admitted that distributors have had their faults too. One bad practice is private banks' use of incentives, such as offering shopping coupons to relationship managers selling the most funds. Though such srategies have become far less prevalent these days.
Another problem, particularly in Asia – one that affects both asset managers and distributors – is that of sales staff turnover.
Roger Bacon, Asia-Pacific head of managed investments at Citi Private Bank, said: “We’re used to being in an industry where portfolio managers might have been doing the same job for 30 years, and that’s great. But your distributors and the fund salespeople change jobs every 18 months.”
As a result, it’s very difficult for such individuals to demonstrate a commitment to developing high-quality relationships with their advisory or distribution partners, he noted.
“That’s much more of an issue here in Asia than it is in Europe and the US, where the front-line salespeople, they are as valuable to the company as the senior portfolio managers can be.”
Others agree that staff churn is an issue, but the situation is seen to be improving.
With more competition, it becomes more difficult to differentiate yourself in terms of product, noted Donna Cotter, Asia head of wealth management at insurer Manulife. “So we’re seeing a lot more emphasis on building long-term relationships and on the type of support [asset managers] can provide us.”
But local sales support is not so important for independent financial advisory firm The Henley Group.
“We just want [fund houses] to focus on the investment management and performance, and we will find them if they are outstanding,” said Martin Hennecke, the firm's chief economist, who oversees the product committee.
“We don’t need fund managers to find us, come knocking on our door, or have a presence everywhere around the globe.”
In anything, Hennecke would prefer to have less contact with fund marketers rather than more.
“If financial advisory firms rely on marketing staff from external fund houses to train their own sales team on how to sell the hottest products, you already have a problem, because you’re being driven from a sales angle rather than the advice coming from your own objective research,” he said. “This often leads to bad investment recommendations.”
AsianInvestor hosted its inaugural Fund Selectors Forum and published its first Fund Selectors Report last month.