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Fund for thought

IFAs are concerned about being blocked out in the distribution chain but some fund firms are determined to keep independent advisers in the forefront of their business.

With depolarisation potentially clouding
the waters between client and provider, many IFAs are wondering where
they fit into the new framework and whether fund companies are
listening to their needs.

Many advisers believe the onset of multi-ties will mean that many
fund firms will spend more time with businesses they are tied to
rather than independents.

Alan Steel Asset Management consultant Alan Adam says some fund
managers may feel it will be easier and more economical to spend time
with people who have to use their services rather than with those
that may not but many fund firms are now going out of their way to
make sure their independent distribution chain is happy.

Isis fund of funds director Richard Philbin says he will always
maintain one-on-one and group meetings with IFAs. He says: “It is
important to know what are the needs of the IFA community, otherwise
we will not hit the mark with our products and not be as innovative
as we could be.”

Philbin says this year’s two new Isis multi-manager cautious funds
are a direct response to IFA demands. He says: “We took some new
products on a roadshow last year and IFAs were saying we were
neglecting the cautious market. These two funds now have over
£40m invested in them so the IFAs definitely knew what they were
talking about.”

Adam says the fact that many fund managers are now paid based on not
just performance but also the amount of visits that they have with
clients and prospective clients has meant that IFAs have been able to
see more fund managers.

He says: “We are adamant about keeping our unique Alan Steel
meetings with the fund managers we use. It taps us into what the
managers are doing gives them the feedback they need to get things
right by us.”

IFAs that are showing innovative thinking, says Philbin, and he
believes this will always keep them in the loop with good fund firms.

IFAs need visits from the right people but Adam says some providers
need a lesson in streamlining relationships. He says product
providers and fund managers too often have multiple people looking
after one IFA, effectively competing for business against each other
and frustrating the IFA. “This clogs up the system and gives a sense
of hulking organisation at the provider,” he says.

Adam claims that firms such as Fidelity, Henderson and Insight seem
to be suffering from a lack of focus in this regard.

Morley head of client distribution James Bowers says his company is
aware of the potential for problems and believes the job of the fund
manager is to make sure it takes its lead from the client. He says
Morley has structured itself to make sure it is consistent with
clients whether they are IFAs, other product providers or individual

Bowers says: “It is easy to fail to communicate within a large organisation.”
He asserts that dealing with complex clients means there will be
numerous touch points within both organisations but he believes it is
crucial that these are joined up and communication is frequent and

He adds: “The job at Morley is doubly challenging as we white-label
a lot of products for other providers and need to make sure that we
are clear on what these clients client’s need as well.”

Bowers believes client relationships which entail managing multiple
asset classes and dealing with multiple product types and
distribution channels mean that fund managers have to get six key
areas right – strategic alignment, product development, distribution
support, investment performance, relationship management, measurement
of success.

He says: “You have to make sure that you and your clients have
complementary strategic objectives. Among other things, this means
clearly understanding of what each party is trying to achieve and in
which client areas they wish to excel.”

Bowers believes this requires regular dialogue to keep understanding
current and to manage change.

He warns fund managers not simply to create products for the sake of
creating them. Clients want new products that satisfy a demand in a
specific client segment, not whatever the fund house has lying around
its factory. He says: “For instance, many of the customers with whom
our clients deal are risk-averse or have been burnt by the recent
fallout from the equity market. This means that fund managers have a
responsibility to be aware of the attitude to risk of the
end-customer before designing a product.”

He says this can only be achieved through regular dialogue and
research as well as making sure the pipeline of innovations is kept

“At Morley, we have found that our core capabilities in fixed income
and property have served us well while equities have been out of
fashion, and have delivered the type of steady returns that our
clients have been looking for.”

Bowers also believes that fund managers have an obligation to provide
a solid platform of support to IFA, rather than just persuade clients
to load up new funds and then walk away.

He says that regular client contact is crucial in ensuring that
provider sales consultants and IFAs have the wherewithal to sell
funds. This helps to build up a picture of the characteristics of
portfolios and provides the right level of transparency to explain
outperformance and underperformance.

“Being visible when things go wrong is just as important as being
there when the numbers look good. This means making sure that market
and fund information is delivered in the relevant format, by means of
the relevant media, and at the right frequency, and by being visible
in the regions as well as opening the door to your factory,” says

Above all, Bowers says both provider and IFA clients need to get the
opportunity to feedback on areas that need improvement, and provide a
benchmark for fund managers.

This year, Morley instigated a service index whereby it measures the
service to its clients across the key disciplines and is able to
establish what has gone well over the year and in which areas it
needs to improve.

Bowers says: “This device allows our clients to feedback in a
confidential environment and we therefore get valuable insights into
their true position. These are the types of innovations fund houses
need to implement to make sure that their commitment to their clients is not just lip service.”


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