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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 (6/30/15)
1) Retirement Assets Total $24.9 Trillion in First Quarter 2015
    ICI | 6/24/2015

Because… IRAs accounted for 30.6% of total retirement assets, remaining the plan type with the most assets. Although DC plans’ market share stood at 27.4% at the end of the first quarter, its market share grew 0.6% from a year ago. In comparison, IRAs witnessed a market share increase of 0.4% during the same 12-month period. IRA assets rose 7.3% over the past year, also slower than the asset growth of 8.3% in DC plans. If DC plan assets continue to expand at a faster pace, the current 3.2% market share gap could be closed in the not-too-distant future.

2) OneAmerica to Acquire BMO's U.S. Retirement Services Business
    BMO | 6/26/2015

Because… The deal, which is OneAmerica’s largest acquisition, will be a boon to the firm as BMO Retirement Services received the top ranking in PLANSPONSOR’s 401(k) DC Survey for the eighth year in a row. Meanwhile, the sale shows BMO’s determination to focus on asset management. BMO garnered $1 billion of retail mutual fund assets in 2014, a significant improvement from a mere $167 million of inflows in 2013. The 20% asset growth within a year and strong flows indicate BMO’s efforts of establishing a greater presence in the U.S. fund market are starting to take shape.

3) Closing Greece’s Exchange Puts Focus on ETFs Without Prices
    Bloomberg | 6/28/2015

Because… With the DJIA down 350 points amid Greek tumult yesterday, ETF shareholders are not the only ones concerned about their investments. Russell’s investment strategists noted in their global outlook for the third quarter published today that the Greek bailout is one of the two key looming events. To alleviate investor worry, fund firms should reach out to shareholders and inform them of their actual exposure to Greece. Portfolio management teams should make their assessment of the potential impact known to the public. Having fund managers and in-house economists available online for questions would also help investors gain confidence in their ability to navigate difficult times.

Total estimated outflows from long-term mutual funds were $3.91 billion for the week ended Wednesday, June 17, according to the Investment Company Institute (ICI). All broad asset classes experienced redemptions with the exception of World Equity, which collected nearly $3.7 billion in net inflows. For the 16th consecutive week, Domestic Equity remained in the red as investors pulled $3.5 billion from these funds. With $4.1 billion in net outflows, bond funds suffered its largest redemptions since mid-December with $3.6 billion flowing out of Taxable Bond and $536 million from Municipal Bond. Hybrid funds slipped into the red with $55 million in net outflows.

Source: Investment Company Institute

Don't Miss This (6/23/15)
1) Pensionmark Introduces Custom TDFs
    Plansponsor | 6/16/2015

Because… The trend towards custom strategies is inevitable, especially for large DC plans, and it will eventually benefit both plan participants and investment management firms that are not recordkeepers. With customized offerings, plan sponsors can blend active and passive investments, add alternative asset classes that are not commonly available in target-date mutual funds, and adjust risk parameters if a pension plan is also offered. Plan sponsors also have the flexibility of selecting top investment managers for different asset classes. However, plan sponsors have to take addition fees into consideration, such as consulting fees, recordkeeping fees, trustee fees, legal fees, and costs associated with developing and continuously monitoring the portfolio.

2) Most Investors Likely to Use Robo-advice: Survey
    Investment News | 6/18/2015

Because… The projection that “the percentage of total investable assets that robo-advisory services manage will jump to 5.6% in 2020 from 0.5% today” seems optimistic if only robo startups were included. While robo-advisors may change the wealth management landscape, we do not expect them to overtake traditional wealth managers in the near future. First, the awareness of robo-advisory services is still low among the general public. Second, investors still need personalized guidance that cannot be provided by online platforms. Third, robo-like offerings from financial giants such as Schwab and Vanguard may slow down the rapid growth of robo-advisors.

3) Goldman Sachs Hires iShares Veteran Tony Kelly for ETF Business
    Bloomberg | 6/19/2015

Because… The hire of an iShares veteran, after shifting Michael Crinieri’s responsibility from trading to ETF product development and distribution last July, is another personnel move that shows the firm’s commitment to the ETF effort. Goldman Sachs Strategic Income Fund, the top seller in 2014 and 2013 which garnered 76% and 78% of the firm’s total sales, respectively, lost its momentum with net redemptions of $3 billion this year through May. With the filing of 11 ETFs last December that included 6 ActiveBeta equity ETFs and 5 hedge fund trackers, Goldman Sachs expects to build its ETF business to help retain existing clients and attract new investors.

Total estimated outflows long-term mutual funds were $3.0 billion for the week ended Wednesday, June 10, according to the Investment Company Institute (ICI). Investors pulled $2.9 billion from bond funds—its second largest withdrawals in 2015—due to the Labor Department’s announced surge in jobs, which suggests the Federal Reserve would likely hike interest rates sooner than expected. Domestic Equity suffered $3.9 billion in net outflows while World Equity gathered $3.6 billion. Hybrid funds managed to gather $185 million during the week.

Source: Investment Company Institute

Don't Miss This (6/16/15)
1) All 10 WBI Active ETFs Reach $100 Million in Under a Year
    Business Wire | 6/12/2015

Because… With assets topping $1.5 billion at the end of May and all 10 ETFs having assets of more than $100 million, WBI’s achievement in less than a year in the ETF business is significant. What is more noteworthy is all funds take a tactical risk management approach, making it one of the fastest growing active ETF managers. WBI employs a proprietary, computer-driven process, yet it is not afraid of disclosing fund holdings on a daily basis. Its quant-based models built around low-volatility risk-mitigation strategies, as well as complete transparency, may have resonated well with investors.

2) Are Managed Accounts a Better QDIA?
    Towers Watson | 6/12/2015

Because… The Towers Watson research shows that the usage has remained low though the number of plan sponsors offering managed accounts has increased. With more plan participants looking for guidance in preparing for retirement, the demand for managed account solutions should rise as they offer personalization that fits the needs and financial situation of individual investors. Besides making fees more competitive, managed account providers need to demonstrate the added value of their service. If they can show how professional management incorporates all income sources into retirement planning to help reach savings goals, plan participants will more likely be convinced and willing to delegate their investment decision to these professionals.

3) MassMutual Research: Survey Shows Concerning Knowledge Deficiency about Social Security Retirement Benefits
    MassMutual | 6/15/2015

Because… The MassMutual survey shows only 28% of respondents received a passing grade when asked basic questions about Social Security benefits, and 8% considered themselves very knowledgeable with only one out of 1,513 survey participants answering all questions correctly. While these findings are concerning, they are not completely surprising as many people would wait until they approach the retirement age to learn more about Social Security. The assumption of Social Security availability may delay their retirement planning and savings. Financial firms need to provide guidance on the impact of funding shortages on retirement income, strategies to maximize Social Security benefits, and consequences of an early withdrawal of the benefits.

Total estimated inflows into long-term mutual funds were $1.3 billion for the week ended Wednesday, June 3, according to the Investment Company Institute (ICI). Despite World Equity’s intake of $3.3 billion, stock funds remained in the red for the fourth consecutive week with $882 million in net outflows due to investors pulling $4.2 billion from Domestic Equity. Taxable Bond collected $2.0 billion, a large uptick from the $605 million gathered during the prior week. Municipal Bond suffered $2 million in net outflows, marking its fifth straight week of redemptions—its longest run of outflows since a streak of withdrawals that lasted about six months in the second half of 2013. Hybrid Funds garnered $189 million during the week, down from $328 million during the prior week.

Source: Investment Company Institute (ICI)

Don't Miss This (6/9/15)
1) Alternative Investments Diversify Portfolios but Some Advisors Still Wary Pershing Study Finds
    Pershing | 6/4/2015

Because… The significant asset drop of the MainStay Marketfield Fund indicates many advisors still base their decision on performance. For asset managers with alternative fund offerings, it is apparent that educating advisors and deepening the relationship with the advisor community should take precedence over launching more new funds. As a growing number of firms are introducing alternative funds, some advisors are having a hard time keeping up with products on the market. Asset managers need to explain how their funds are different from others, what objectives these funds can achieve in terms of meeting investor demand, and how the funds can be used in portfolio construction.

2) Bill Seeks More Digital Retirement Plan Communication
    Planadviser | 6/8/2015

Because… We support the legislation that would allow the electronic delivery of plan information, which will reduce costs and enable plan providers and sponsors to communicate with plan participants in a timelier manner. However, product and service providers need to contemplate how to make the dissemination of digital communication more effective. Messages should be not only creative to capture plan participants’ attention and inspire them to take actions, but also personalized to satisfy needs of different generation groups. The development of digital communication strategies should be a concerted effort by various departments to ensure they are consistent, targeted, and fully compliant with relevant regulations.

3) Stifel to Acquire Barclays’ Wealth and Investment Management, Americas
    Stifel | 6/8/2015

Because… Stifel is building its arsenal with another acquisition after nabbing Sterne Agee earlier this year and Legg Mason Investment Counsel a year ago. The addition of Barclays’ business will help Stifel expand from a regional brokerage firm to a national player with operations in New York and other metropolitan areas. In addition, Barclays’ focus on high-touch services for wealthy investors will diversify the publicly-traded firm’s revenue sources. An imperative mission for Stifel now is to attract and retain as many advisors as possible, a task that does not seem too formidable for an experienced acquirer.

Total estimated inflows into long-term mutual funds were $734 million for the week ended Wednesday, May 27, according to the Investment Company Institute (ICI). World Equity continued to drive sales with $2.6 billion in net inflows, down from $4.3 billion during the prior week. Domestic Equity, on the other hand, remained in negative territory for the 13th consecutive week with $2.9 billion in net outflows; however, this represents an improvement from the more than $5.0 billion in redemptions suffered in each of the prior two weeks. Taxable Bond only managed to gather $797 million due to investor concern regarding potential interest rate hikes. Municipal Bond remained in the red for the fourth consecutive week with $170 million in net outflows. Hybrid funds managed to gather $331 million during the week.

Source: Investment Company Institute (ICI)

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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