Investire | November 2023
BTPs through the roof, asset management in decline, rising ETFs: the market has taken a clear direction and the distribution models have been adjusting accordingly.
The distribution model based on direct product placement (active funds, certificates, private market investments), which has been standing for the past fifteen years, has been showing clear limitations in a context characterized by sky-high interest rates and a spasmodic attention to costs.
This model has been giving way to two other distribution models which, albeit not new, are currently living a new spring.
Firstly, the distribution model based on the so-called “wrappers” made of asset management and unit linked insurance plans. The wrapper model has made a comeback for its possibility to combine management of portfolio, protection, and tax optimization.
The wrapper model includes active funds, ETFs and individual titles mixed by financial advisors (who are supported by their bank/financial network) after having assessed their clients’ risk profile and time horizon.
Secondly, the so-called “advisory” model: here too there are multiple ingredients, active funds, ETFs, individual titles, and private market investments.
In this context, BTPs are more than welcome, but they are certainly not the only guests. However, financial advisors have the chance to indulge their clients’ inclination towards BTPs, following at the same time the number one rule of financial consultancy, that is diversification.
The main difference between the current distribution model and the two newer distribution models is not insignificant: it entails a transition from product consulting to portfolio consulting.
Hence, the criticisms to portfolios with a strong concentration in specific asset classes, individual sectors, and few investment themes.
Diversification drives the change that is currently underway, along the lines of what is currently taking place in the UK and the USA.
The vast majority of assets under management which have been growing significantly within portfolios managed by financial consultants is also inscribed in consultancy models.
Today, authoritative sources estimate that the distribution model based on product consulting corresponds to 70%, while the distribution model based on portfolio consulting corresponds to the remaining 30%: however, in a few years the ratio will probably and unsurprisingly change.
The path has been traced and, barring unforeseen circumstances, is headed toward a fee-based model. This is testified by rising satisfaction of all stakeholders: end investors, consultants, bankers, financial networks, and asset management companies.
An investigation on the level of satisfaction of financial advisors and private bankers reveals that, on the front of advanced consultancy and asset management, the financial networks geared towards the placement of products with retrocessions tend to veer more decisively towards the wrapper and advisory models.
A further proof is the strong concentration of asset managers and their entry in the ETFs market, a real silent revolution outlived by leaders and small but virtuous businesses.
Nicola Ronchetti