Investire | January 2023
Over the past four years, the relationship between Asset Management Companies (AMCs) and their suppliers, in particular financial networks, private bankers and bank managers, has changed radically.
At first, it was love (at times even a little too unconditional): in just over fifteen years, the number of AMCs within portfolios increased from two or three to dozens. Today, however, we are headed for a showdown.
On average, the number of accredited AMCs with direct distribution agreements has decreased by one third in less than ten years.
In fact, several suppliers have given in to the temptation to do for themselves, that is to either add value to their own existing AMCs (where present), or to create internal asset management companies.
Delegated management – in other words, when an external asset manager manages an investment fund on the behalf of their supplier, often the clone of another fund sold à la carte – is increasingly widespread.
In fact, suppliers benefit from a triple advantage.
First of all, costs can be contained by obtaining better conditions from the AMCs.
Secondly, internal processes come to be simpler (fewer active agreements, less complexity).
Thirdly, financial advisors appear “secured”, making funds transfer harder in case of change to another network or bank.
Thus, one would expect the silent retreat of many AMCs which have been operating in the Italian market for decades or just for a few years.
Instead, the number of AMCs in Italy is currently on the increase.
In addition, there is an increase in the communication and marketing costs, unrelated to pay-to-play strategy, especially in companies with few assets under management which aim at growing in terms of brand awareness.
On the other hand, large AMCs have been reinforcing their positions, strengthening the confidence pact with each professional through communities, Apps, webinars, and weekly or, in some cases, daily opportunities for discussion.
Of course, not all that glitters is gold – the number of top managers working in AMCs is dwindling. In fact, AMCs appear more interested in investing in sales-oriented figures, rather than institutional representation, thus favouring short-to-medium-term results over consolidated relationships.
There is, of course, a reason for this. In the eyes of foreign AMCs, Italy is a land of opportunities – two thousand billion in liquid assets; the saving rate remains, despite its slowdown, quite solid; and, more importantly, to this day its distribution system remains a unique instance in the international panorama.
Fewer chances to reach distribution agreements together with the increasing number of suitors is producing increased competition, narrower margins for AMCs, and more negotiation power for suppliers.
How can this vicious circle come to an end? The solution is as simple as it is hard to implement: quality of investments products (ratio between costs and returns) as well as their distinctiveness.
Giving an identity to a brand and to investment solutions is fundamental in a mature sector with a tendency to homologate the supply. This would add value to the activity of sales and marketing teams in support of suppliers.
Ultimately, this is a key strategy to avoid being perceived as a commodity and to be thus obliged to work merely on the reduction of costs, sometimes at the expense of quality.