Mutual fund distribution sure has changed since my days as a staff reporter for Dalbar’s Mutual Fund Market News (now Money Management Executive) back in the 1990s.
Here are some of the key changes impacting asset managers that I heard in the presentation by DeRemer, partner and head of the advisory practice at Grail Partners LLC:
- Financial intermediaries–especially fee-based intermediaries–are more important than ever with the rise of wrap programs, defined contribution platforms, and variable annuity and subadvisory platforms.
- It’s harder to know the ultimate client because of omnibus accounting
- Fees are under pressure, yet revenue-sharing is costing 45 basis points or more
- Distribution costs are coming out of fund sponsors’ profits, rather than simply out of the fund expense ratio
- There are new, lower cost share classes, such as W or P shares for wrap or platform shares with about 10 basis points of 12b-1 fees
- Fund selection at broker/dealers is shifting from individual reps to the firms’ fund selection units (see my other June 24, 2008 post for more on B/Ds’ fund selection)