European Appetite for Advice Grows
October 4, 1999
NEW YORK - Although banks control between 40 percent and 90 percent of mutual fund sales in European countries and currently only offer proprietary products, investors' growing interest in unbiased advice will compel banks to broaden their offerings.
In addition, independent financial advisors are beginning to sell funds in Europe and could become another important distribution channel for U.S. mutual fund companies aspiring to do business in Europe.
This was the consensus of speakers at a conference on global distribution of mutual funds sponsored by International Business Communications of Southborough, Mass. IBC sponsors conferences and seminars on a variety of financial services topics.
Europeans are beginning to realize they must assume responsibility for their own long-term financial security and are fearful they will not be able to do so without help, said Yusaf Samad, managing director for Europe fund manager relationships with Citibank of New York. Samad is based in London.
While banks have a stranglehold on mutual fund sales and their market share is formidable, banks provide little or no service to mutual fund customers, said Bluford Putnam, president of CDC Investment Management Corp. of New York, which specializes in hedge funds.
"The banks may have the brand, but their brand is absolutely no service and zero return," Putnam said. "Post offices even sell mutual funds, promoting them with posters and brochures. I don't call that distribution."
"Bank domination is weaker for higher-return or more sophisticated products," Samad said.
U.S. firms seeking to enter the European market can compete with banks by providing European investors with objective, unbiased advice and solid performance, Samad said.
Thomas Miltenberger, general principal for mutual funds marketing with Edward Jones of St. Louis, Mo., said that his company's brokers are enjoying success in the U.K. with their direct, one-on-one investment approach. Miltenberger attributed their success to the fact that other competitors in England do not offer comparable advice and operate under the mistaken assumption that the English are averse to discussing personal financial matters.
Several of the speakers also said that although European banks dominate mutual fund sales, the top players are different in each country and no one company is dominant in more than one country. Thus, as Europe becomes more unified, the landscape of existing leaders may change and offer opportunities to newcomers, the speakers said.
Furthermore, European banks, which until now have resisted selling third-party products, are beginning to realize that if they want to retain customers, they will have to offer them financial planning advice and improve the performance of their products. Because European banks are not strong in service, marketing, customer communication or portfolio management, they will have no choice but to form partnerships with U.S. firms that can provide these strengths, speakers said.
"Bank channels are opening up because they risk losing client relationships," said Frank Fischer, managing director of Standard & Poor's Fund Services of New York. Fischer is based in Hofheim, Germany.
Mireille van Varenberg, international partnership manager for asset management with BBL Group Asset Management of Paris, said that bank customer loyalty in Europe is already beginning to wane and banks have begun exploring adding new services.
U.S. firms can take advantage of this changing environment in Europe, Samad said.