Amidst Ongoing Industry Consolidation, Asset Managers Must Change Their Business Practices In Four Distinct Ways To Compete, According To DST Report
NEW YORK, Sept. 26, 2017 /PRNewswire/ -- DST Research, Analytics and Consulting, a provider of data-driven insights and distribution solutions to financial companies, today released new research outlining the impact of significant catalysts of change that are reshaping the asset management industry and the ways in which firms need to prepare.
The report series, "Prevailing in a Changing Distribution Landscape," includes three titles that examine the imbalance of asset managers' current business models and the industry trends challenging them; provides a framework to assess the firms' preparedness; and outlines steps to modernize sales team structures and compensation programs.
This report series includes scorecards for asset managers to assess their current business models, a framework to help firms determine the best way for them to balance their needs with those of their customers, and tactical recommendations to align teams and compensation to achieve desired results from their sales organization.
"Increased regulatory scrutiny and fee compression have forced the industry to consolidate to achieve better economics," says Steven Miyao, Head of DST Research, Analytics and Consulting. "The largest distributors are overhauling their platforms to put potentially more than $3 trillion of assets in motion. At the same time, advisor practices for managing client assets are changing, with only 36% of AUM individually managed by advisors. As a result, asset managers must transition their distribution organizations to focus on the right advisor relationships centered on high-value, personalized engagement and delivery of solutions."
DST's research focuses on four key business practices that the company expects will be under increasing pressure if left unchanged:
-- Coverage and Alignment: Investment decisions for 64% of all AUM are
outside the direct control of advisors (research analysts, models,
etc.). Sales teams should:
-- Work with their firm's Business Intelligence team to identify
advisor practices that are using models, programs or platforms in
which the investment decisions are outsourced. Sales teams should
not cover these advisors because they cannot influence their
purchasing decision.
-- For advisors who can be influenced, use segmentation to identify
advisor practices where product and service needs align with the
strategic direction of the asset manager and represent strong
revenue and profitability potential.
-- Team and Territory Structures: As advisor business models evolve (45% of
advisors planned to conduct more fee-based business in 2017), advisors
are becoming more elusive (in-person meetings down 16% and call volume
down 27% since 2011). Assign coverage based on the sophistication of the
advisor and skills of the salesperson. Upskill the salesforce to match
the sophistication level of advisors and approach advisors based on the
advisor's preferences.
-- Compensation Models: Compensation models heavily relying on variable
commissions based on gross sales are not motivating behaviors that drive
profitability. For the average external salesperson in 2016, gross sales
commissions represented 35-49% of total compensation, possibly
motivating sales behaviors that are contrary to asset managers'
strategic objectives. Compensation structures must leverage metrics,
such as holding period, that better align to profitability to ensure
sales behaviors are in-line with the firm's strategy.
-- Relationship Management: As much as $3.3 trillion in actively managed
assets are in funds with Morningstar Ratings of 1, 2, or 3 stars - funds
most at risk during product rationalization indicating a need to focus
on retention activities. Many firms will require a dedicated
relationship manager role to mitigate the risks posed by assets set in
motion by rationalization, consolidation, and other forces at play in
the industry.
"The implication of these industry trends for distribution organizations is clear: sales and marketing initiatives must be data-driven strategies focused on advisor acquisition and retention," says Matt Fronczke, Head of Distribution and Product Consulting for DST Research, Analytics and Consulting. "To effectively execute, asset managers need to rethink product, talent optimization, roles, team structures, compensation methods, and sales and service models."
The "Prevailing in a Changing Distribution Landscape" report series builds on previous DST research and advisor surveys on wholesaler and financial advisor preferences and practices in association with Horsesmouth, as well as a two-curve study of the future of the industry.
For more information on DST's "Prevailing in a Changing Distribution Landscape" research, contact Myra Bartalos, Head of Marketing for DST Research, Analytics and Consulting, at mbartalos@dstsystems.com.
About DST
DST Systems, Inc. (NYSE: DST) is a leading provider of specialized technology, strategic advisory, and business operations outsourcing to the financial and healthcare industries. We enable clients to transform complexity into strategic advantage by helping them continually stay ahead of and capitalize on ever-changing customer, business and regulatory requirements in the world's most demanding industries. For more information, visit the DST website at www.dstsystems.com.
Media Contact:
Laura M. Parsons
DST Global Public Relations
+1 816 843 9087
mediarelations@dstsystems.com
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SOURCE DST Systems, Inc.
