Disintermediation and the future of the funds industry

20.03.2017

The findings about open architecture – its benefits for investors and the threat from financial and regulatory pressures - were some of the most eye-catching results from a recent survey of around 200 fund professionals carried out by Funds Europe in association with Clearstream. The report, "Disintermediation and the future of the funds industry", is the first in a series to answer the question, “What’s next for funds?”

Entering a new age

The survey comes at an interesting time for the industry. The traditional channels by which investors buy funds, such as banks and financial advisers, are being challenged by new channels, such as online platforms and robo-advisers. At the same time, regulation such as the retail distribution review (RDR) in the UK and the Markets in Financial Instruments Directive (Mifid) in Europe are changing the way by which intermediaries are incentivised to promote investment products.

The survey highlights the dilemma between embracing open architecture and the recognition of its cost. New technology and automation has the potential to make open architecture affordable for distributors and asset managers.

Key survey findings include:

  • 80% of respondents believe customers get a better deal when their providers offer open architecture.
  • 59% think open architecture is under threat from financial and regulatory pressures.
  • 48% believe robo-advisers will become the industry standard for dealing with retail clients.
  • 14% think robo-advisers will become the standard for dealing with high-net-worth clients.
  • 67% believe passive funds such as ETFs will gain a bigger proportion of fund flows than actively managed funds in future.
  • Respondents believe, in future, online direct models will be the main channel for distributing funds.

Bernard Tancré, Head of Business Solutions, Investment Fund Services at Clearstream stated: “As a market infrastructure, we have to play a role to protect open architecture for the benefit of the end investor. By providing centralised repositories for data, and by facilitating more efficient exchange of information as well as by offering a state-of-the-art third-party fund processing platform, we can help to bring down costs for distributors, increase efficiency and client asset safety and so protect the open architecture model.”

The report titled "Disintermediation and the future of fund distribution", first in the series "What’s next for funds?" is available below.