Centralised investment propositions are offered by firms such as wealth managers, discretionary managers and investment consulting firms. They enable mass-market financial intermediaries to outsource their clients’ investment portfolios to specialist investment management companies, who use structures such as multi-asset funds and model portfolios to run in a cost-efficient way.
Meanwhile many nationwide financial advice companies and networks have established their own central investment panels to carry out investment research and export their findings to the firms’ thousands of client-facing advisers.
The end result is that fund selections are more frequently being made by centralised research teams whose decisions affect an increasingly large number of client portfolios.
While a large number of advisers, even tiny village firms, have decided to continue to carry out investment selection themselves, the rise of the centralised proposition is causing managers to refine their sales attack postures. Some of them have been reducing their regional salesforces and focusing on relationships with centralised teams.
Ben Gutteridge, head of fund research at Brewin Dolphin, said he was seeing more firms splitting up their sales teams, with one group focusing on wealth managers and platforms and others focusing on advisers.
Mr Gutteridge said asset managers do seem to be making more of a “conscious effort” now to speak to research teams and said there are “more dedicated sales people that we’re dealing with”.
Paul Surguy, head of managed funds at Sanlam Private Investments, said that he had noticed more of a focus from asset managers on getting on panels and buy lists, though he said it may only be “at the margins” of the industry at the moment. He said: “I do hear sales teams talking about getting on ‘panels’ more and more.” However, the evolution in the sales blend could pose a threat to intermediaries.
The increased focus on panels could lead to a decreased adviser-facing presence from asset managers, something that Frank McGarry, head of business development at Psigma Investment Management, said seems to be more of a trend at the moment.
JPMorgan Asset Management (JPMAM) last year reshuffled its sales team by bringing in Andy Larkin from Neptune to head up a brand new unit dedicated to getting JPMAM’s funds on the ‘buy lists’ of networks and wealth managers.
Mr Larkin’s team has been created to be separate from Mike Parsons’ field sales team, which will concentrate on maintaining relationships at the individual regional office level. Jasper Berens, head of UK funds at JPMAM, said the restructure was in response to the RDR, which he said had caused “significant change” in the fund distribution and fund selection market.
Mr Berens suggested the move would benefit clients – with each segment of its client bank now having a dedicated team.
While this may be the case, it no doubt shows the increased importance asset managers are attributing to getting their funds on panels and buy lists.
JPMAM is not alone though. Fidelity also restructured its sales team in 2013 including introducing a sales team focused on wealth managers and platforms. However, the group has also introduced what it calls a “consultative team”, which engages with adviser businesses to establish how Fidelity could best serve the adviser. Asset management firms have been reluctant to say they are assigning fewer resources to regional advisers, perhaps fearing that they might be labelled as abandoning advisers.
Instead they have stressed that even with the increasing concentration of buy lists, just getting on that list is not the end of the sales process. David Aird, managing director of UK distribution at Investec Asset Management, said although “more assets are being amalgamated onto platforms controlled by a smaller number of gatekeepers... it does not remove the need to have regional representation”.
He said: “If you are on a panel you still need your sales team in the regions to drive engagement with the advisers themselves and generate bottom-up demand.”
For Investec, originally a South African firm and a relative newcomer to the UK, the breadth of its regional sales team will be different to established UK players such as Schroders and M&G Investments, which have large regional teams.
A spokesperson for M&G said it had no plans to change its sales team because the firm has the resources to fully cover both centralised buy lists and regional IFAs.
But it perhaps takes quite a leap to think that encouraging advisers to pick your fund is worth committing the same level of resource to as convincing a wealth manager to include your fund on its buy list, especially when the wealth manager could be investing hundreds of millions of pounds.
This could mean IFA coverage being put under pressure, although there are examples of fund groups boosting their regional teams – including large business such as BlackRock and smaller firms such as Miton.
Companies which have not yet decided how their sales team will work in the post-RDR environment need to be considering it now. While the lure of a big investment by a wealth or discretionary manager will be strong, these companies have the capability to undertake their own research and will likely invest whether they are lobbied to or not if they see attributes they like.
Therefore fund groups should consider whether reducing their adviser coverage is a sensible move as support offered to adviser businesses will be more greatly valued and could produce a long-term relationship.
