Fund managers have picked up a large slice of the distribution available in the rush to get product under the noses of planners and clients but a number have chosen not to take that path. Kate Kachor looks at the reasons why they have bucked the trend.
They are only a handful but there are a small group of fund managers who have shied away from tied distribution methods and continued to compete in the hard-nosed financial services through third party planners.
Some have used badging as a distribution method, some have modelled their approach on international operations and for others it is just the culture of the company. But despite the motive or method these fund managers are still some of the strongest voices in the Australian financial services market.
“By being independent we do not compete with financial planners, and we do not take over their clients,” says BT Funds Management vice president of retail Rob Coombe.
Coombe says unlike many managers with distribution, his group does not pose a threat to financial planners, as the group does not use its own planners in its distribution of products.
“We try and create a very powerful investment brand. We believe trying to be on everyone’s distribution lists is crucial as independents.”
Coombe says BT has been without a distribution network since its beginnings, and it is something he believes the group will forever be without.
He says being an independent distributor ensures that at all times the group has to compete and compete effectively. He says the group also has to be fairly disciplined, and be good at their business.
“If you actually own distribution then you have to do everything that you offered to the market very well. If you don’t, the distributors could choose not to distribute your product, so the onus to perform is higher,” he says.
However, there have been certain comments within the industry that claim BT does in fact own distribution.
Coombe says the common misconception made by financial planners and other groups are that BT does own distribution through its holdings in the Investor Group and Count Wealth Accountants.
However, according to Coombe, the group only owns 10 per cent of the groups, not the required 20 per cent.
“We have never owned distribution. As far as I can remember, and I’ve been here for more than a decade now,” he says.
“We feel that by being independent it gives a wider base of distribution – no one has any reason not to carry BT on their menu.”
Credit Suisse Asset Management Australia (CSAMA) has also slotted into the independent category and despite having four core businesses – asset management, investment banking, private banking and financial services, there is no evidence of a tied distribution network.
The group began in Australia in 1990, and manages funds for a range of clients including superannuation funds, government agencies, insurance companies, large corporations and managed funds investors.
In Australia the only two entities that operate are Credit Suisse Asset Management and Credit Suisse First State Boston which are the asset management and industry banking businesses.
“The distribution strategy for CSAMA retail products has focussed on maintaining positive reviews by research houses and educating those business writers who are permitted to support CSAMA funds,” CSAMA retail funds national sales manager Clayton Coplestone says.
“With in excess of 7,500 advisers now permitted to include CSAMA funds in their portfolios, the education phase is the primary focus to ensure that all advisers are aware of our product range,” he says.
Coplestone says a by-product of the increased usage of awareness of CSAMA products by financial advisers is an increase in the level of direct inquiry for the investor.
Having been ranked in the Top 10 in new net retail flows in 2000, Coplestone says CSAMA is not daunted by the thought of outside competition.
He says that recent company findings have shown that advisers who are associated with manufactures who have distribution have proved to be the group’s strongest supporters.
“These tend to be larger dealer groups, with more sophisticated advisers who are fiercely independent, and select funds based upon performance and the value that can be added to their clients portfolios,” Coplestone says.
“We have not been disadvantaged at this point by not having tied distribution. One possible opportunity that could be furthered through having distribution is the ability to distribute unique products. This could be achieved through possible joint venture opportunities with distributors,” he says.
A more recent addition to the ranks of non-tied distribution is Deutsche Asset Management. In December last year the global funds manager put its local financial planning division up for sale and in turn, turned itself into an independent distributor.
Last month, the National Australia Bank paid $115 million for Deutsche Financial Planning and its non-discretionary master trust business Deutsche Funds Management.
As previously reported in Money Management, the National says it will integrate the 65 Deutsche planners into the Godfrey Pembroke group it acquired when it purchased MLC last year.
Godfrey adviser numbers will rise to 175 and funds under advice will rise $3.9 billion to $7.5 billion. It will also bring the number of planners operating under the NAB banner to about 1500.
According to Deutsche Asset Management (DAM) chief executive and head of private banking Michael Monaghan it was felt the planning arm should be divested as part of a greater strategy.
“We just felt that it would be more beneficial for someone else to own it. And even though we don’t have financial planners any more, we are still doing a lot of other things,” he says.
Monaghan says the group has been working on a new business strategy, to create a truly global presence, alongside that of its international parent group.
He says DAM was already combining asset management in Australia with the group’s international dealings and has also been targeting the menus of master trusts and wrap accounts, having already placed their products with Asgard and Summit.
Prior to 2001, Monaghan says the group distributed a range of products through independent financial planners via a range of master trusts and wrap platforms.
As well as having this presence in the retail market, Deutsche also have a corporate super product, Direct Choice.
Monaghan says that after becoming independent the group now sells its corporate super product directly to the corporate market, which then helps the group create its retail clients. It is a strategy the group is also using with its other corporate products which it is opening up to a wider retail market.
“We have a number of new products coming out this year such as new hedge fund products and international equity products, and they generating some interest. It is pretty well going according to plan,” he says.
Fund Managers without tied distribution
Fund Managers Funds Under Management ($M)
BT Funds Management $18,830.38
Deutsche Asset Management $108.08
Credit Suisse Asset Management $663.86
Invesco/County $491.67
Merrill Lynch $2,268.50
Norwich (formerly Portfolio planners) $2,391.50
Rothschild $2659.37
Tyndall $159.29
Salomon Smith Barney $47.45
AM Corp $2,384.58
Fund managers building tied distribution
Fund Managers Funds Under Management ($M)
Macquarie $9,857.29
Tower Trust $452.50
Tower Life $490.02
Challenger $245.67
Source: Assirt market share report September quarter 2000.
