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Q: What technologies are having the greatest impact on sales and distribution?
A: Given the magnitude that technology continues to play within the financial services industry, FUSE fielded a survey earlier this year to specifically determine the technological impact on the sales process of investment products. Survey respondents rated how certain technologies will impact sales and distribution over the next three years. On average, survey respondents stated that tablets would have the most impact on sales over the next few years. In fact, nearly 30% said they will change the face of sales forever. More than half (57%) of survey respondents provide tablets to sales/distribution personnel. Also, larger firms have adopted the use of tablets at a faster pace than smaller firms, in addition to firms with a retail focus compared to firms with an institutional focus. Cloud computing was ranked second for having the greatest impact on sales and distribution over the next three years. Cloud computing has become an emerging theme that is gaining investor attention. Forrester Research projected total public cloud revenues to rise 27% annually to nearly $160 billion in 2020, up from $15 billion in 2010. IDC also predicted that while global IT spending increased by 6% in 2011, spending on public cloud computing services will grow five times faster.

Q: Will the ETF industry maintain its momentum moving forward?
A: We do see ample opportunities for the industry to expand; however, the pace at which ETFs are bringing in new assets is no longer growing at the clip that we’ve seen in past years. In fact, AllianceBernstein recently forecasted that the $1.1 trillion U.S. ETF market will grow by a compounded annual rate of 13%, hitting $6 trillion by 2025, far below expectations of a $10 trillion industry by 2025. In terms of actively managed ETFs, the industry hit a recent roadblock with the SEC’s rejection of Huntington’s request to convert an open-end fund to an ETF. Had Huntington received the green light, we expected other firms to follow its lead. As noted in Barron’s, Citigroup reported that it is getting more difficult for new fund companies to stand out. The ETF industry remains highly concentrated—the top 10 ETF providers account for 95% of AUM. Also, the article highlights that new products account for 2% of industry ETF growth so far this year, down from 6.4% last year. 

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Don't Miss This (4/1/15)
1) Retirement Assets Total $24.7 Trillion in Fourth Quarter 2014
    ICI | 3/25/2015

Because… The ICI’s year-end 2014 data shows that 55% of DC assets was invested in mutual funds and 48% of IRA assets was held in mutual funds, indicating that there is still room for fund firms to penetrate the DC market. In 2014, $34 billion of new cash was absorbed by long-term funds in DC plans, down from $63 billion in 2013. Another $30 billion was taken in by long-term funds in IRAs, declining from $74 billion in the prior year.

2) Morgan Stanley Plans to Sell Adviser Data to Fund Companies
    Investment News | 3/30/2015

Because… Data from a distributor could enable ETF sponsors to develop more targeted marketing strategies. By dissecting data in different ways, ETF managers would be able to perform analyses on advisors’ trading habits, gain a better understanding of products that appeal to them, and identify advisors that are heavy and loyal users of ETFs. Armed with such information, ETF providers could craft more effective messages for client communication, create personalized educational programs, and tailor marketing campaigns to better suit advisor needs.

3) The Coalition of Collective Investment Trusts (CCIT) Announces Awareness Week Plans
    PR Newswire | 3/30/2015

Because… We hope the introduction of the first-ever Collective Investment Trust Awareness Week will serve its purpose – “promote education on and awareness of collective investment trusts (CITs)." CITs have much lower management fees. The fact that their fees can be negotiated and their holdings can be customized add to the benefits of using them. Asset managers should make plan sponsors aware of the availability of this investment structure. Meanwhile, fund firms need to disclose differences between CITs and mutual funds in terms of regulatory oversight, transparency concerns, and liquidity issues.

Total estimated inflows into long-term mutual funds were $3.31 billion for the week ended Wednesday, March 18, according to the Investment Company Institute (ICI). This cumulative total represents approximately half of the prior week’s intake. With $3.7 billion in net inflows, World Equity drove sales while Domestic Equity was the only broad asset class to fall into redemption mode with nearly $1.8 billion in net outflows. Taxable Bond gathered $259 million, a large drop from the $998 million collected during the previous week. Municipal Bond’s inflows of $190 million were a 45% decline from the prior week. On the other hand, Hybrid funds experienced in 6.5% uptick in sales with $913 million in net inflows.

Source: Investment Company Institute 

Don't Miss This (3/24/15)
1) Investors Shun Stock Pickers, Favor Vanguard, BlackRock, State Street
    Investment News | 3/16/2015

Because… While it’s not news that retail investors are shunning stock pickers, another survey of retirement plan consultants just released by PIMCO shows that active management is still favored over index-tracking passive strategies for many asset classes. So active asset managers need to focus more on asset classes/strategies that can leverage their expertise, such as fixed income, international equities, asset allocation, and alternatives. For the U.S. equity market, firms still have a chance to stand out if they refine their methodologies to mitigate risks while enhancing performance.

2) State Street Global Advisors Retirement Survey Finds Most Employees Stressed and Distracted by Financial Worries
    State Street | 3/18/2015

Because… The survey of approximately 1,000 employees showed that nearly 60% are emotionally stressed and distracted by their financial situations with 37% acknowledging financial stress has caused their productivity at work to suffer. The fact that so many workers are burdened by financial stress indicates that it has become imperative for financial firms to help them alleviate concerns and improve financial well-being. Identifying causes of the stress, prioritizing financial obligations, and creating a realistic action plan that can effectively tackle financial issues would be a good start to inspire confidence and ease anxiety.

3) New Research From Fidelity and BlackRock Reveals a Key to Growth for ETF Adoption is Educating Investing on ETF Basics
    Fidelity | 3/19/2015

Because… While the study discovered that two-thirds of individual investors do not currently own ETFs, it revealed the vast untapped potential of ETF adoption, including increased ETF exposure from existing shareholders, anticipated purchase of their first ETF from non-owners, planned ETF investments from young investors, and additional allocation to ETFs by financial advisors. Despite the rapid growth of the ETF industry, the number of ETF sponsors is still far smaller than the number of mutual fund firms (71 vs. 796 at the end of 2014). Advisors’ lack of in-depth knowledge and ETFs’ absence from most retirement plans also affect the awareness level of individual investors.

Total estimated inflows into long-term mutual funds were $6.38 billion for the week ended Wednesday, March 11, according to the Investment Company Institute (ICI). Investors poured $3.9 billion into World Equity as the European Central Bank began its bond-buying program. Although Domestic Equity only gathered $326 million, it was a marked improvement from redemptions of $1.9 billion during the prior week. Fixed income saw its ninth consecutive week of inflows with $1.0 billion and $278 million flowing into Taxable Bond and Municipal Bond, respectively. Hybrid funds gathered $836 million, up from $528 million during the prior week.

Source: Investment Company Institute

Social Media (3/20/15)

Several articles have pointed out recently that despite the understanding that social media plays an important part in today's business world, few have been willing to completely embrace it. The graphs above show a quick look at the size (not quality) of our industries largest participants' social media presence. In general, LinkedIn has the highest average followers, with 113,000, followed by Twitter with 110,000, and then Facebook with 63,000. Fidelity had the most amount of followers on Facebook, with 159,446 followers, compared to the average of 63,000; JPMorgan had the most LinkedIn followers with 477,920, far above the average of 113,000 followers; and BlackRock had the strongest Twitter following with 227,000, which when combined with iShares' 180,000 followers gave it 407,000 followers, also high above the average of 110,430 followers. Overall, Fidelity and Vanguard have the largest overall social media presence, while American Funds and Dimensional Fund Advisors have the lowest; this is in line with expectations considering each of those firm's overall focus on front-end presence.

Sources: Facebook, Twitter, LinkedIn 

Don't Miss This (3/17/15)
1) iShares Makes 80% Cut to FTSE 100 ETF Charge
    Investment Week | 3/10/2015

Because… The distributing iShares FTSE 100 UCITS ETF is the oldest ETF on the London Stock Exchange and the largest equity ETF in the U.K. The substantial fee cut from 0.4% to 0.07% for this widely-held ETF suggests the price war is heating up in Europe. Europe-listed ETPs raised $26 billion in the first two months of 2015, compared with net flows of $31.2 billion into U.S.-listed ETPs. European ETPs’ YTD sales were very strong considering their assets were less than a quarter of assets in U.S. ETPs. With a market share of 46.4% already quadrupling its closest competitor’s market share of 11.6%, iShares will be able to maintain its leadership position with the fee reduction.

2) Retirement Income Gap Projected at $7.7T
    Planadviser | 3/12/2015

Because… The projection of the aggregate retirement income deficit at $7.7 trillion is alarming. Another analysis published this month by the National Institute on Retirement Security shows that nearly 40 million working-age households (about 45% of all working-age U.S. households) do not own any retirement account assets. These research findings should serve as a wake-up call for retirement product and service providers. The industry has a long way to go to help Americans boost their retirement savings and income. Directing their attention to the consequences of inadequate savings and income, encouraging them to take more control of their own financial future, and providing practical guidance on retirement planning may motivate people to get started.

3) WisdomTree Files for the Global ex-U.S. Hedged Dividend Fund
    SEC Filings | 3/12/2015

Because… In addition to WisdomTree Global ex-U.S. Hedged Dividend Fund, the firm filed for the DEFA Hedged Equity Fund and the International Hedged SmallCap Dividend Fund this week. The new fund introductions signify the firm’s goal of expanding its dividend-weighted product line. With net inflows of $2.9 billion in February and YTD sales of $6.9 billion, WisdomTree became the 5th best-selling firm for both the month and the year among all mutual fund and ETF managers. Its asset growth of 25% in just two months and 44% for the past 12-month attests the benefit of a unique focused strategy.

Total estimated inflows into long-term mutual funds were $6.51 billion for the week ended Wednesday, March 4, according to the Investment Company Institute (ICI). All broad asset classes gathered inflows with the exception of Domestic Equity’s $1.9 billion in redemptions, marking its first withdrawals in seven weeks. Investors poured $2.9 billion into World Equity—its highest intake since June 2014. Taxable Bond led sales with $4.3 billion while Municipal Bond only garnered $675 million. Hybrid funds collected $528 million, a significant drop from the $1.1 billion intake during the prior week.

Source: Investment Company Institute

Don't Miss This (3/10/15)
1) Deutsche Bank Releases Annual Alternative Investment Survey Highlighting Hedge Fund Sentiment and Allocation Trends for 2015
    Deutsche Bank | 3/3/2015

Because… By monitoring trends in the hedge fund industry, mutual fund firms can gauge shifts in investor sentiment, determine strategies to cope with the hedge fund growth, and identify opportunities to collaborate with hedge fund managers. The concentration among the largest hedge managers suggests that some small and mid-sized hedge fund managers may find it difficult to raise assets and instead choose to target the retail market. Since firms courting retail investors face challenges in areas of marketing, distribution, operations, and regulatory compliance, partnerships with these firms could benefit mutual fund managers that are looking to develop hedge products.

2) Charles Schwab Launches Schwab Intelligent Portfolios
    Schwab | 3/9/2015

Because… Schwab’s response to robo-advisory finally arrived with fanfare. The absence of advisory fees, commissions, or account services fees, as well as the use of the lowest-cost ETFs, open-architecture with third-party providers, and the minimum investment requirement of as low as $5,000 should resonate with the investing public, especially young investors who do not have large account balances and would like some investment guidance. However, some investors may question its relatively high cash allocation. Assets invested in this program could accelerate after the advisor version is available in the second quarter, which offers RIAs a white-label option.

3) Alternatives Make Push for Retirement Accounts
    Investment News | 3/10/2015

Because… Despite the increased allocation to alternative investments among retirement plans, the adoption of alternatives is slow in general. In addition to the pricing pressure, the lack of a solid understanding of their investment risks and structural complexities is another obstacle. To encourage more plan sponsors to consider non-traditional investment options, alternative fund providers need to show plan sponsors how their products actually lower volatility, improve risk-adjusted returns, and provide portfolio diversification. The enhanced transparency can help plan sponsors build their confidence in alternatives.

fuse survey
Currently, passive strategies account for 23.8% of mutual fund and ETFs assets under management. What will that number be in five years? 25%
Greater than 40%

General Membership Meeting
- 5.01.13
Mutual Funds and Investment Mangement Conference
- 3.17.13

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