A large perceptions gap exists between distributors and manufacturers of funds, especially surrounding areas such as fees, according to a st...

A large perceptions gap exists between distributors and manufacturers of funds, especially surrounding areas such as fees, according to a study by the Boston-based Financial Research Corporation. The distributors included private and retail banks, independent financial advisors, brokers, independent asset managers, insurance companies and some fund manufacturers. Manufacturers refers mainly to asset managers and fund providers. The study found that distributors felt that increasing competition would drive their earnings down because of the availability of large numbers of identical funds. They said investors were becoming more sophisticated and aware they could negotiate fees, commissions and charges. This meant manufacturers would see their fees fall somewhat and the distributors accepted the knock-on effect this would have on their commissions. But the fund manufacturers felt fees would not really change and were confident of winning back some of the fees taken by distributors. “There is an element of complacency among manufacturers when it comes to charges. The reality is they will probably see more changes than they reckon on,” said Magnus Spence, managing director at FRC. The study found the two parties could not even agree on the fastest growing product within the fund management sector. The distributors said structured products were the fastest growing, followed by funds offering some kind of guaranteed return while fund providers saw funds of funds and multi-manager funds as the future market leaders. “One wonders if the two sides talk. Surely the manufacturers listen to the distributors?,” said Mr Spence. Elsewhere, the distributors felt customer satisfaction was the main priority going forward but the manufacturers were more interested in sales growth followed by developing new business. Fidelity tops the list as the major supplier but the study suggests some differing opinions on the asset manager, as almost 40 per cent of manufacturers feel Fidelity will still dominate the market in five years time, whereas only 20 per cent of distributors agree, “Manufacturers appear obsessed that Fidelity is way ahead, but the distributors’ response implies it is more feared than it needs to be,” Mr Spence said.