shutterstock_543389590.jpgIt’s no secret that organic growth in the mutual fund industry will be driven by retail investors—that is, households. According to the Investment Company Institute (ICI) 2016 Fact Book, of the $16 trillion in U.S. mutual fund assets, 89% sits in household investments such as individual retirement accounts, defined contribution retirement plans, variable annuities, 529 plans and Coverdell Education Savings Accounts. And according to a 2015 Oliver Wyman report, financial advisors exert a dominant influence over retail assets: an estimated 58% of households with less than $100,000 in investable assets and more than 75% of non-retired households with more than $100,000. But advisors themselves are seeing their businesses shaped significantly by the demands of their customers: the retail investors.

Therefore, in the shorter term, it’s important that asset managers understand these demands if they’re going to win the mind share of advisors. Consider the following scenarios:

  • Advisors with more portfolio discretion are likely to have investors who care about specific asset manager attributes. For these advisors, asset managers can expend more effort prepping them to answer questions from their investors.
  • Product managers will be able to develop products (such as asset allocation products) based on investor needs, making the experience of selling, tracking and explaining portfolio performance better for advisors.
  • Some investors care about markets, product performance and portfolio managers’ views. They’re also highly engaged with their advisors. There are others who don’t care, and then there’s everyone in between. Understanding investors’ preferences and predilections will help asset managers cater to the advisors who serve them with the right mix of content and tools.

In the medium to longer term, the asset management industry must at least consider big changes in the nature of advice that consumers will seek and how it will be delivered. Consumers may not fully realize the impact of changes to tax, health insurance or consumer financial protection on their financial lives.  The current model of knocking on different doors and then connecting the dots with a financial plan may not be able to handle the complexity of the future. Asset managers who understand consumer needs by segment—eventually segments of one consumer—are likely to have an advantage in the advice delivery model of the future.

When we’ve discussed these trends with clients, several strategy-changing questions pop up. Here they are—along with advice on how you can find the right answers:

  • Develop a probability-based timeline for industry transition.
  • Match the evolution of your organizational structure and competencies to the timeline.
  • There will be a spectrum of integrated advice models, some digitized and others more high-touch.
  • Understand the implications of the spectrum for your firm and develop a road map.



At ZS, we’ve grappled with these questions and have developed hypotheses that will be tested in upcoming research projects, so stay tuned. In the meantime, if you have ideas for the research or would like to be notified of    our findings, feel free to reach out. 


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Topics: asset management, Investment, Financial Services, retail assets, Rubesh Jacobs