Employing efficient techniques for informing distribution channels of new investment creations is crucial to asset managers who want to succeed in such a competitive industry. With numbers of products growing daily, the secret of success may lie in engaging distributors without giving the impression of simply offloading the latest flavour of the month.
Naturally, distribution executives at the investment houses are used to saying that the ‘product push’ approach is alien to their sales strategy and that new products are created just to meet clients’ needs.
“We want to make sure that the products we launch are in demand by our distributors’ clients,” says Jan Willem Siekman, head of sales and marketing at Robeco, the Rotterdam-based firm managing ?140bn of assets and operating under the Rabobank group’s umbrella.
“We do not just go to the client with the product we have developed and try to push it. The process starts well ahead of that.”
If day-to-day communication between salespeople and distributors provides regular opportunities to float ideas and discuss investment themes and market trends, which Mr Siekman describes as “a sort of weak product development”, manufacturing a product in collaboration with the distributor is the next, more formal, stage.
 | ‘We want to make sure that the products we launch are in demand by our distributors’ clients’ - Jan Willem Siekman, Robeco |
An example of such collaboration is the structured note ‘emerging mix’, where the two building blocks of emerging market debt and emerging market equity were put together by the largest Dutch funds house ING and Robeco itself respectively. The product has found straightforward distribution channels through Rabobank, ING and ABN Amro, says Mr Seikman, who adds that Robeco enjoys the services of “a couple of hundred” third-party distributors globally.
A similar product development process, focusing on the European market, is now being put in place together with Dutch bank SNS, says Mr Siekman.
One size doesn’t fit all
Although many asset managers claim they view their internal distribution channels in the same way as any other third-party distributor, Philippe Zaouati, head of marketing at Crédit Agricole Asset Management (CAAM) group, makes clear that the type of approach used and the products distributed cannot really be the same.
The range of products CAAM offers its European third-parties – the group has 500 European distribution agreements with major distributors, fund of fund managers and private banks – is very wide and includes the 70 sub-funds of its flagship Luxembourg-domiciled Sicav.
“Distributors will then select one, two or more of these funds, depending on their needs, their strategy and of course on the performance and the track-records of our products,” says Mr Zaouati.
He also stresses the importance of understanding the distribution drivers of the different markets, competitors’ products and customers’ preferences. “We don’t sell the same products everywhere, but we have to adapt marketing and sales strategies to the different countries,” he adds.
The whole product range is also available for distribution in Crédit Agricole’s banking networks, but these internal channels really rely on the sales of a much narrower product range, specifically developed in collaboration with the asset management firm, to increase their assets.
Screen test
“We design products dedicated specifically to meet the networks’ needs. We are very close to our proprietary networks, and we have a dedicated team liaising with them,” says Mr Zaouati.
The French group recently enlarged its proprietary distribution network in Italy through its local subsidiary, following the Italian antitrust authority’s recent ruling that Banca Intesa will have to sell 600 branches, mainly from the Cariparma and Friuladria networks, to Crédit Agricole by October this year, as a conditional go-ahead of the merger between the Italian heavyweight and the other major financial firm Sanpaolo IMI.
While marketing products through emails, intranet or even roadshows are all fundamental in informing distributors, it is also true that many banks allocate huge resources to fund and manager selection. While some institutions, such as Deutsche Bank, have a highly developed quantitative screening process, and also a strong, sophisticated retail marketing operation in the branches – which means fund houses must in term inform bank staff about products – there are those who believe the two approaches do not sit easily together.
Experience, networking, reading publications and analysts carrying out due diligence in the various different asset classes are all necessary to help identify the right product or manager. But the final decision often comes down to an instinctive belief – held by the distributors – that an individual or group of individuals in an asset
management company have “that little bit extra that is going to deliver”, according to Rupert Robinson, co-head at Schroders private bank and head of the investment side of the business.
 | ‘We don’t sell the same products everywhere, but we have to adapt marketing and sales strategies to the different countries’ - Philippe Zaouti, CAAM |
“The qualitative aspect, meeting individuals face-to-face, is the single most important part of any decision making of owning or selling a product,” he says. Basically, no matter how well they try to communicate their message, there has to be an underlying skill in managing portfolios.
“This industry is saturated with mediocrity. The aim is identify the top 10 to 20 per cent of money managers with which you can invest one’s clients’ capital,” says Mr Robinson, who has 20 years of experience in the industry, having built and developed multi-manager businesses, including the one at Rothschild.
Filtering out
“I cannot get the feeling a particular manager is a really talented individual from looking at performance numbers,” he says. “You can’t get that second hand. I think you have to see and feel it.”
The amount of product information that distributors regularly receive can be overwhelming. Efficient filters, more or less sophisticated, are put in place.
“There is a lot of junk that comes through the mail and goes straight in the bin,” says Mr Robinson. Of course they want to hear about people’s products, he says. “If we like what we see and read, then we will invite them in to come and talk to us about it.”
Often, the concept of informing people is associated with the sales process. Salesmen are often investment professionals, knowledgeable in portfolio theory or portfolio optimisation, but distributors tend to request to talk to the fund manager.
“If you are going to make an investment in a fund you want to get in front of the fund manager,” says Mr Robinson. “You don’t want to ultimately get the message from the salesmen, because that is when it gets diluted.”
But perhaps what really matters is that salesmen are knowledgeable and prepared.
“I think the most irritating thing is a salesman coming in who does not really understand the product they are talking about,” says Mr Robinson.
Mr Siekman says distributors must also put themselves in the shoes of the salesman. “You cannot expect car salesmen not to sell cars,” he says. “From my conversation and my experience, what is irritating is the way in which it happens, when you really have just this one product and you try to force it onto clients.”
Talking about developments in the markets, about trends and themes and how a product fits into asset allocation is what is really important, he says.
Different levels of data
The type of information a distributor requires may vary depending on whether third-party products are off the shelf or used as building blocks within client solutions.
Diviesh Vithlani, head of savings and investments at Swedish banking group Swedbank, complains that third-party managers tend to underestimate their role in marketing.
“They are just relying on us as a distributor for marketing their funds. But we are not interested in investing a lot of money in that, unless they are contributing as well,” he says. “The greater the marketing they do, the larger inflows they will have from distribution.”
Henrik Bak, head of institutional sales at Danske Capital headquartered in Copenhagen, explains that third-party products are employed mainly as building blocks in the solutions it builds for its clients, and external providers are used on a sub-advisory basis.
“If providers get their products on the shelves, then they would have to use their wholesalers to talk to the various branches,” he says. “But we control the whole process, our partners just provide the building blocks.” Formal discussions about trends and themes are not needed, says Mr Bak, although occasionally training sessions can be organised if necessary.
“We have enough challenges in controlling our own idea generation,” says Mr Bak. “We don’t need the sales stories and help in selling, because we do all that ourselves.”
But external managers have to be good in other aspects, such as dealing with Danske Capital’s clients. Mr Bak says that while, when winning a mandate with a large pension fund, product providers might be requested to meet with that client’s management board once a year, Danske Capital might call and request their partners to meet a client with just a few days’ notice. They tend to agree to that, he says.
“We look at our third-party providers as our own portfolio managers and we would like them to see our sales and client management force as part of their organisation,” he adds. “So what we have with those partners is really a partnership without exchanging shares, a close partnership, rather than a client relationship.”
Up-to-date information
The other aspect of informing distributors about products revolves around keeping them up-to-date on product performance. The frequency and level of detail can depend on different factors, say distributors.
“We monitor and screen performance on a regular basis and what we are looking for is really explanations for out or under performance. We can then make a judgement as to whether or not we are satisfied with that explanation or whether or not we should be getting out of that product,” says Mr Robinson at Schroders.
When buying from a third-party provider, the type of relationship and the amount of money that the bank has invested in that product will sometimes determine the availability of information.
“If you have a lot of money invested in a fund, then the level of service that you get tends to be of a superior nature than if you have a small amount of money,” says Mr Robinson. He adds that one has to be realist and also respectful of information flow from third parties.
“We would not expect to necessarily get real time valuations from organisations, but we would expect to get a valuation no more than a month out of date, if we want to run risk reports on a particular fund,” he says.
SIEKMAN’S SECRETS OF SUCCESS
- “First and foremost you need to know very well what your clients are doing, what their portfolios look like.”
- “Second, don’t go in with mediocre products. In the past you could sell mediocre products. You cannot do that anymore. Don’t go with third-quartile product that does not define itself against its peers. It is irritating for the distributor.”
- The third secret is to push only the best performing products “We talk a lot, but we actually sell a very constrained part of our total product range,” he says.
Products can be performing in a lot of ways, not just from a risk-return point of view, says Mr Siekman. “They can be performing on a particular attribute, like sustainability, which has nothing to do with performance,” he says, reminding us that Robeco, at the end of last year, acquired the majority stake in Switzerland’s Sustainable Asset Management group and its product range now includes many new products in this area. A product is performing because it delivers alpha against its benchmark but also because of its diversifying nature against its peers, he says.
Asked to comment on whether fund managers should talk to sales prospects, Mr Siekman says: “Portfolio managers should be generating alpha and not talking to clients so much.
“Sometimes if there is a large conference, for example, you do bring portfolio managers with you. The issue is that portfolio managers should not be doing roadshows.”
