New Research: Shift to Solutions Alters Fund Industry Patterns

The months following the completion of the RRSP season are traditionally a time of reflection for the Fundland competitors. In what has become an annual rite of spring, the fund industry growth patterns are dissected to reveal key drivers and their beneficiaries. Flow metrics are squeezed for signs of change in the investor and advisor asset class preferences.

But the analytical perspectives of the past, centered on the asset class view, might no longer prove sufficient to inform today’s product development, marketing and sales initiatives. This is because in the course of the past decade the Canadian funds industry has been transformed by the growing weight of pre-assembled advice solutions, such as fund wraps, balanced funds, segregated funds and guaranteed withdrawal benefit (GWB) policies wrapping mutual funds. The research feature in this month’s Insight  documents the myriad ways in which their collective impact has reverberated throughout the funds industry. The shift to solutions has affected the volume and directionality of industry flows, advanced the institutionalization of asset allocation decisions, and benefited those players with well-defined presence in the solutions arena (such as deposit-takers) or a stake in other manufacturers’ solutions (such as fund companies with strong presence on the insurance shelf).

In the intensely competitive conditions of today’s industry, fund companies must ensure they clearly understand the sources of new business to adapt their marketing and sales messaging accordingly. The key is to follow the “money trail” and separate the impact of institutional asset allocators from the asset class trends permeating the individual and advisors fund and portfolio allocation decisions.

For more on this topic, see the April 2012 issue of Insight Advisory Service Posted by Goshka Folda