European Mutual Fund Distribution 2006

Published by: Datamonitor

Published: Jun. 2, 2006 - 103 Pages

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 Crédit 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

Abstract

• Sizes the distribution channels of mutual funds in five major European markets using FERI FMI data.
• Draws on data from the Datamonitor European Third Party Funds Survey 2006, covering 262 wealth managers across Europe.
• Pan-European assessment of fee structures, regulatory developments and financial advice markets.

• Distributors: an indispensable industry profile analyzing key distribution channels and their potential to help underpin strategic planning
• Providers: identify and assess the potential of particular channels for fund distribution and how to satisfy the demands of banks/financial advisors
• Support strategic initiatives by identifying the most important funds related regulatory developments across Europe and their potential impact

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