Rise of the machines in global funds distribution - EY

Oct 1, 2015 - distribution technologies and business practices has been due to the ... degree of personalization and enhancement of the client ..... Forrester Research, 83% of. Chinese customers use mobile applications to bank online, and. 73% use mobile applications to invest online. Europe.
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Connectivity The EY global distribution review Volume 1, issue 1

Rise of the machines: electronic platform distribution

Connectivity

Introduction to

Connectivity T

his issue of Connectivityakl`]Õjklg^ a new EY thought leadership series focused on global funds distribution. Future issues will each concentrate on a different aspect of the complex distribution equation. Connectivity won’t necessarily offer exhaustive answers or comprehensive solutions. But we will seek to raise important points of discussion, highlight key trends in the global distribution of funds, and examine where the industry is headed and how we think leading practices can be implemented.

A large portion of the wealth and asset management business model — particularly relating to operations, risk management, technology infrastructure, client reporting and portfolio management — has been addressed from a cost management perspective over the past decade. True growth will likely be achieved only through a Õje%oa\]^g[mkgfoaffaf_af\akljaZmlagf&

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Further, a rich landscape of vendors providing an exhaustive range of services, from marketing and compliance to quantitative analytics and data management, has developed extensively in recent years. The crucial function that generally \]Õf]kl`]km[[]kkgj^Yadmj]g^YfqYkk]l eYfY_]e]flÕjekladdj]eYafk\akljaZmlagf& Whether from a technology standpoint, looking at the rise of electronic platforms, or from a regulatory standpoint, looking at the restructuring of remuneration models and client interaction, fund distribution is undergoing sweeping changes. For the industry, several major challenges, such as the restructuring of the compensation model, must be addressed. O]`gh]qgmÌddÕf\l`YlConnectivity looks at these many challenges, highlights the key issues afngdn]\Yf\hgaflkl`]\aj][lagf^gjÕjeklg take to succeed at distribution globally.

Executive summary

• Electronic platforms are slowly but inevitably • Part of the slowness in adapting to new becoming a vital channel in global funds distribution technologies and business distribution. Few asset managers can afford practices has been due to the entrenchment to continue using distribution models from g^gd\[geeakkagf%ZYk]\[geh]fkYlagf Z]^gj]l`]_dgZYdÕfYf[aYd[jakak$af[dm\af_ models that left little incentive to radically klYlmkimgeg\]dkZYk]\hjaeYjadqgf^Y[]% change the system. But widespread lg%^Y[]afl]je]\aYlagfgjhj]%]paklaf_eYjc]l regulatory reform of pricing models is entrenchment, as well as those that offer only now sweeping the globe, notably the limited investor options. Retail Distribution Review (RDR) in the UK and Markets in Financial Instruments • Interaction between counterparties to Directive II (MiFID II) in the European Union. exchange information and securities via 9\\alagfYddq$hja[af_eg\]dk$km[`Yk^]]% electronic platforms is nothing new in ZYk]\YhhjgY[`]k$Yj]fgoÕjedqafhdY[] ÕfYf[aYdk]jna[]k&@go]n]j$l`]_dgZYd in the industry. Thus the stage is set for wealth and asset management industry more distribution to move toward electronic `YkYj_mYZdqZ]]fl`]kdgo]klÕfYf[aYd hdYl^gjekYf\YoYq^jge^Y[]%lg%^Y[] services sector to fully leverage the power intermediation. of rapidly expanding technology and oa\]khj]Y\Y\YhlYlagfg^k[j]]f%ZYk]\ • Fund distribution platforms and their transactions. Instead, distribution in most respective rates of growth vary widely from asset management markets has focused on market to market — as does even the mere personal intermediation with little attempt at \]Õfalagfg^l`]ogj\ÉhdYl^gje&ÊO`ad]l`] true innovation. industry may be thinking globally in terms of Yf]fl]jhjak]%oa\]\akljaZmlagfkljYl]_q$Õjek must act locally to customize and leverage the platforms used in individual markets.

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• Perhaps the most advanced