European Mutual Fund Distribution 2006

Table of Contents

• CHAPTER 1 EXECUTIVE SUMMARY
  • Introduction
  • The distribution landscape
  • Regulatory developments
  • The role of the Internet
  • Third party distribution
  • The financial advice market
  • Fees and charges
• CHAPTER 2 INTRODUCTION
  • What is this report about?
  • Who is the target reader?
  • How to use this report
• CHAPTER 3 THE DISTRIBUTION LANDSCAPE
  • Introduction
  • Key findings
  • Distribution across Continental Europe is dominated by the retail banks
    • French retail mutual fund distribution is becoming increasingly diversified
      • Banks maintain their control of overall distribution
      • Sales through institutional or corporate channels represent over a quarter of all French distribution
      • The IFA channel is not making a significant impact on the distribution landscape
      • Insurance wrapped mutual funds are a large part of the French market
    • Banks distribute the majority of Publikumsfonds in Germany
      • The German market is diversifying but is still bank-centric
      • Banks have a firm grip on the distribution of mutual funds
      • The insurance channel has gained in importance despite pressure from banks
      • IFAs and other advisors remain a significant channel for the distribution of mutual funds
      • Fund supermarkets and the direct channel are relatively insignificant
    • The retail banking sector's mutual fund sales account for two thirds of the entire distribution market in Italy
      • IFAs and insurers have benefited from recent changes in customer behavior
      • Other channels continue to make minimal impact on the market
    • Banks alone account for over 90% of all Spanish retail mutual fund distribution
      • The density of the branch networks are the key to the success of the retail banks
      • Other channels are a marginal presence in the Spanish market
    • Unlike in the rest of Europe, intermediaries dominate mutual fund distribution in the UK
      • IFAs have historically dominated the distribution of mutual funds
      • Retail banks have had varied but generally little success in selling mutual funds to their client base
      • Other channels have seen their market share drastically reduced
    • Data Tables
• CHAPTER 4 REGULATORY DEVELOPMENTS
  • Introduction
  • Key findings
  • Regulation is changing mutual fund distribution across Europe but there are still several barriers to a 'single market'
    • UCITS III allows more innovation but funds still require country approval
    • Since the instigation of UCITS III tax discrimination has become less of an issue within the EU
      • France and Germany in particular had been guilty of discriminating against foreign UCITS
      • Italy and the UK were both guilty of tax discrimination
      • Tax discrimination has been tackled by the European Commission targeting the main offenders
    • The European Fund Categorization Forum seeks to redress the lack of a standardized Europe-wide fund classification system
    • Rules for the financial advice market are evolving across Europe
      • The French financial advice market has undergone major changes
      • Regulation is likely to have mixed benefits for the German financial advice market
      • Depolarization is reshaping the UK financial advice market
• CHAPTER 5 THE ROLE OF THE INTERNET
  • Introduction
  • Key findings
  • The growing popularity of online banking across Europe has led to the development of online mutual fund distribution
    • Online banking is common among Europeans with Internet access
    • Technology and increasing Internet usage has driven the development of online distribution
  • Several models of online mutual fund distribution have become successful
    • Fund supermarkets are beginning to take off in the UK while struggling to establish a foothold in the rest of Europe
      • Fund supermarkets have developed according to the needs of customers in the market
      • Many fund supermarkets have become a tool for intermediaries
      • Private investor confidence will determine whether fund supermarkets develop into IFA tools or become more customer-focused
    • Wrap platforms are an important aspect of indirect distribution
    • Online discount stockbrokerages have developed in America but have yet to make an impact in Europe
    • Banks and IFAs are often intermediaries for online mutual fund distribution channels
• CHAPTER 6 THIRD PARTY DISTRIBUTION
  • Introduction
  • Key findings
  • In just a few short years the distribution of third party funds has become the norm across Europe
    • There is significant variation in the proportion of third party fund distribution by retail banks and wealth managers across Europe
    • Third party distribution is prevalent in the Belgo-Dutch region, particularly through the retail banking network
    • Third party distribution in France is much more prevalent among the country's wealth managers
      • Only 40% of France's largest retail banks offer third party mutual funds today
      • While almost 90% of wealth managers in France offer third party funds and/or use external fund managers
    • A significant proportion of German retail and private banks do not offer third party funds
      • The private banking sector in Germany is more receptive to third party fund distribution
    • Open architecture is slightly more prevalent among Italian private banks than Italian retail banks
    • The Nordic region currently has the lowest proportion of private banks offering third party funds of the regions surveyed
    • Third party fund sales in the private banking channel is widespread in the Spanish market
    • Third party fund sales in the UK are below the European average in both the retail and private banking markets
• CHAPTER 7 THE FINANCIAL ADVICE MARKET
  • Introduction
  • Key findings
  • Germany has, by far, the largest intermediary market in Europe
    • Germany's financial advisors are not held in high public regard
  • In the UK, 40,000 individual financial intermediaries distribute 47% of retail unit trusts and OEICs
    • Despite the high degree of development, depolarization is likely to trigger changes in the UK market
  • In comparison with the UK and Germany, France has a very small and undeveloped financial advisory market
    • Asset managers are the most important non-bank source of financial advice in France
  • While the Spanish and Italian advisory markets are fairly big, they are strongly tied to the retail banks
    • Independent advice is dwarfed by the strength of the Spanish retail banking networks
    • There are 35,000 financial advisers in Italy, the third largest market in Europe
  • In the Nordic region financial advice does not come from an IFA equivalent but other financial services professionals
• CHAPTER 8 FEES AND CHARGES
  • Introduction
  • Key findings
  • Transparency in fees and charges was the trend for 2005
    • Guidelines for reporting fees was introduced in Europe in 2005
    • The UCITS III directive, including the introduction of a simplified prospectus that disloses fees, was phased in across Europe in 2005
  • Investors will benefit from standardized disclosure
    • In the UK investors are able to view TER charges on funds, although many funds retain a traditional pricing structure
      • No load unit trusts are still not the norm in the UK
      • Annual management fees on mutual funds in the UK range from 0 to 2.15%
      • The UK's Premier Resolution Growth fund has a whopping 4.75% TER
    • There is more variation in French fees and charges than in those of the UK
      • French front-loaded fees vary considerably, with 344 charging 6% or more
      • French annual management fees have a greater range than those of the UK
    • The German market is generally considered to be a level playing field in the application of fees to funds
      • Some German funds have fees applied on an ongoing or end basis
      • Management fees and front loads are not generally high
    • Italian funds offer investors a wide variety of fee structures
      • Front loading is polarized as some are among the highest in Europe while many other funds are not front loaded at all
      • Italian management fees are average for the major European markets
    • Spanish investors prefer not to pay fees up front
      • Front loading has therefore not taken off in the Spanish market although other fees remain low
      • Management fees for Spanish funds peak at 3%
• CHAPTER 9 APPENDIX
  • Further Reading
    • Global Wealth Management SPP
      • Interactive Databases
      • Market Reports
      • Strategic Insight Reports
      • Wealth Management Competitor Tracker
    • Datamonitor Asia Pacific Wealth Management SPP
    • Savings and Investments SPP
      • Interactive Databases
      • Reports
      • Briefs
    • Life and Pensions SPP
      • Interactive Databases
      • Reports and Briefs
    • Financial Advice Market SPP
  • SPP writing team
  • List of Tables
    • Table 1: Major markets by distribution channel 2006
    • Table 2: Almost 80% of wealth managers in Belgium and the Netherlands already offer 3rd party funds to their clients, January 2006 (Table 1 of 2)
    • Table 3: Almost 80% of wealth managers in Belgium and the Netherlands already offer 3rd party funds to their clients, January 2006 (cont'd: Table 2 of 2))
    • Table 4: Dexia is the only major retail bank in Belgium and the Netherlands not to offer 3rd party funds to their clients, January 2006
    • Table 5: Within two years only Credit Agricole will be among the major retail banks in France still closed to 3rd party funds, January 2006
    • Table 6: Nearly 90% of wealth managers in France already offer 3rd party funds to their clients, January 2006 (Table 1 of 2)
    • Table 7: Nearly 90% of wealth managers in France already offer 3rd party funds to their clients, January 2006 (cont'd: Table 2 of 2)
    • Table 8: Only 60% of the main retail banks in Germany offer 3rd party funds to their clients, January 2006
    • Table 9: Nearly three quarters of the wealth managers in Germany offer 3rd party funds to clients directly through their private banking divisions, January 2006 (Table 1 of 3)
    • Table 10: Nearly three quarters of the wealth managers in Germany offer 3rd party funds to clients directly through their private banking divisions, January 2006 (cont'd: Table 2 of 3)
    • Table 11: Nearly three quarters of the wealth managers in Germany offer 3rd party funds to clients directly through their private banking divisions, January 2006 (cont'd: Table 3 of 3)
    • Table 12: Almost 90% of wealth managers in Italy offer 3rd party funds, January 2006 (Table 1 of 2)
    • Table 13: Almost 90% of wealth managers in Italy offer 3rd party funds, January 2006 (cont'd: Table 2 of 2)
    • Table 14: Only 2 of the main retail banks in Italy do not offer 3rd party funds, January 2006
    • Table 15: Only 60% of wealth managers in the Nordic region offer 3rd party funds directly through their private bank, January 2006 (Table 1 of 2)
    • Table 16: Only 60% of wealth managers in the Nordic region offer 3rd party funds directly through their private bank, January 2006 (cont'd: Table 2 of 2)
    • Table 17: Almost 70% of retail banks in the Nordic region offer 3rd party funds, January 2006
    • Table 18: 70% of retail banks in Spain offer 3rd party funds, January 2006
    • Table 19: 90% of wealth managers in Spain offer 3rd party funds directly through their private bank, January 2006
    • Table 20: 63% of retail banks offer third party funds, January 2006
    • Table 21: 70% of wealth managers in the UK offer 3rd party funds directly through their private bank, January 2006 (Table 1 of 2)
    • Table 22: 70% of wealth managers in the UK offer 3rd party funds directly through their private bank, January 2006 (cont'd: Table 2 of 2)
  • List of Figures
    • Figure 1: Retail banks control a relatively small share of mutual fund distribution in France
    • Figure 2: Distribution in Germany is slowly diversifying but is still controlled by the banking networks
    • Figure 3: Retail banks' sales alone account for almost two thirds of mutual fund sales in Italy
    • Figure 4: The retail bank is the dominant channel for the distribution of mutual funds in Spain
    • Figure 5: Almost half of all mutual funds sold in the UK are sold through IFAs
    • Figure 6: Efforts to standardize the European fund market have made progress in some areas but others remain an issue
    • Figure 7: The growth of online banking has driven online distribution, which itself has led to greater take-up among customers
    • Figure 8: The majority of wealth managers and retail banks across Europe already offer 3rd party funds, but most of those who don't, don't plan to in the next 2 years
    • Figure 9: 90% of wealth managers in Spain offer 3rd party funds directly through their private banks today, but only 60% of Nordic wealth managers do
    • Figure 10: In France a minority of the main retail banks offer 3rd party funds today
    • Figure 11: Three quarters of wealth managers and more than 80% of retail banks in Belgium and the Netherlands offer third party funds to their client bases
    • Figure 12: A minority of French retail banks offer third party funds while private banks are far more likely to distribute them
    • Figure 13: 60% of retail banks and 72% of wealth managers in Germany offer third party mutual funds today
    • Figure 14: A high proportion of both retail banks and private banks in Italy offer third party funds
    • Figure 15: 65% of retail banks and just over half of private banks in the Nordic region offer third party mutual funds
    • Figure 16: 71% of retail banks and 90% of private banks in Spain offer third party mutual funds today
    • Figure 17: 62% of retail banks and 67% of private banks in the UK offer third party mutual funds
    • Figure 18: UK IFAs have by far the largest market share relative to other European markets, while German advisers vastly outnumber those in other markets