Power of Distribution

There is power in building a great product, success of a product is well determined by a variety of factors and a robust sales and distribution is at the top of the list.

Financial and insurance products have the same lifecycle. The investment teams and the product teams build the products. To give perspective there are more than 8,582 mutual funds, 3478 ETFs, 500,000 unique corporate bonds in US. Its like a power generation machinery that is constantly working to generate maximum returns with minimum risk. These large power houses have invested for over two decades to be efficient and effective at creation of the financial products. With years of investment and focus, these institutions have mastered the process of financial product creation.

The next decade will need to focus on the distribution of these financial instruments. Distribution is the mechanism through which the investors can purchase these financial products or rather invest into these products. Competitive products in the market are abundant and the prices are being pushed lower with lower minimum investable. Sales and distribution teams have to work harder and smarter for each opportunity.

As we put things in perspective, asset management industry has evolved over cycles of highs and lows - while still being resilient. The acceleration of technology for enhanced client experience and the need for scalability has led to a focus of asset managers investments in client technologies. These technologies have a direct impact to drive sales by providing efficiencies. Just like gold rush, ‘tech surge’ will transform the way financial organizations work. Retail banking is already evolved with enhanced mobile friendly experiences opening a new account, looking at transactions online, online payments are all reimagined. The client experience for financial firms including asset managers is transforming. There are operational efficiencies in internal processes along with the client experience that need to be targeted effectively. Client experience in isolation is a lost cause. This usually requires sustained investments to change and take deliberate actions. The cyclical nature of the financial industry constantly impacts these efforts. Technology in particular has seen a lot of focus – directly impacting revenue generation efforts. New technology, tools & data create better and more informed sellers.

Traditional Distribution Methods:

• Personalized Relationships: Heavy reliance on in-person meetings and relationship building through intermediaries such as financial advisors and brokers.

• Manual Processes: Utilization of paper-based documentation, phone calls, and manual data entry, which can be time-consuming.

• Limited Reach: Often constrained by physical and logistical barriers, leading to limited scalability.

The distribution organization is seeing a lot of change driven primarily post COVID. The three primary factors causing this paradigm shift

• The need for easy of doing business

• Change of guard with millennia in driving seats, need for self-serve and

• Disruption due to fintech's

The organizations that will be ahead of the curve to invest and adopt will start to reap benefits and will also protect market share. There will be an enhance realization of investments if done appropriately.

Modern Distribution Methods:

• Technology Integration: Use of automated platforms and digital channels for seamless client onboarding and engagement.

• Data-Driven Insights: Advanced analytics and AI tools to personalize offerings and predict client needs.

• Scalability and Speed: Ability to reach a broader audience through digital marketing, webinars, and real-time online communication, significantly enhancing distribution efficiency.

Modern methods blend digital tools with insights that complement relationship management, creating a balance of efficiency and client-centric service.

Technology investments are expensive for the organization. They also need a lead time to realize the true benefits of the investments. The impact realization is driven by a direct correlation between the scale and customization needs with the investment.

Use of technology across distribution channels and various product wrappers varies to accommodate the right level of engagement. While on one side of the spectrum, I see institutional distribution as a white glove service, takes a long time to build relationships and reap results. These relationships are also deep and more fulfilling. Asset managers spend a lot of time, money and energy in cultivating these relationships. Once established, there are plenty of opportunities to cross sell and be an investment partner for the organization. Technology becomes an enabler for these interactions. On the other hand, retail distribution channels are a business of low margin/fees and large volumes. Technology becomes a key driver to lead and partner to drive scale in sales. There are 333,000 financial advisors(FA) in US alone, with age distribution of 40+ years 61%, 30-40 years 28% and 20-30 years 11%.

Within next 5 years majority of FAs will be millennials. The decision making of the 'FA millennial takeover’ is starkly different. They look for self-serve capabilities, and ease of use and doing business is a key differentiator. The asset management industry is in a race to FA market capture.

Evolution toward a more tech-integrated distribution framework is vital for staying competitive. Embracing innovation and adapting to new client demands, especially from millennial financial advisors, can drive efficiency, scalability, and growth. Companies that strategically invest in distribution technology, fostering deeper client engagement and streamlined operations, will position themselves for sustainable success in an increasingly dynamic market landscape. To thrive, the focus must remain on a balanced approach—leveraging technology while preserving the human touch that cultivates strong, enduring relationships.