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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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Total estimated inflows into long-term mutual funds were $3.89 billion for the week ended Wednesday, April 8, according to the Investment Company Institute (ICI). World Equity drove sales with $3.2 billion, but its Domestic counterpart remained in the red with $1.3 billion in net outflows. Taxable Bond rebounded from negative territory during the prior week and collected $1.7 billion. However, Municipal Bond suffered $187 million in redemptions. Hybrid funds only collected $251 million, down from $720 million during the prior week.

Source: Investment Company Institute

Don't Miss This (4/14/15)
1) LIMRA Research Finds Majority of Companies Helping Financial Professionals with Social Media
    LIMRA | 4/7/2015

Because… The LIMRA study pointed out key factors that can determine social media success and challenges financial services companies face when using the social media tool. Financial companies should realize that many professionals in the industry have not fully grasped features and benefits of social media, despite its prevalence nowadays. Making sure they become conversant with social media usage is a prerequisite to advisor support. In addition, firms should, instead of presenting the similar content across various platforms, be more creative in tailoring strategies for different applications as they are all distinct from each other in terms of users and functions.

2) Invesco PowerShares Announces Launch of S&P 500 ex-Rate Sensitive Low Volatility Portfolio
    PR Newswire | 4/9/2015

Because… This ETF offering caught our attention as it aims to kill two birds with one stone – providing low volatility equity exposure while protecting against rising interest rates. The surging market volatility and potential interest rate rises are two major concerns among investors. Invesco PowerShares is one of the leading ETF providers in the smart beta arena. PowerShares S&P 500 Low Volatility Portfolio (SPLV) has more than $5.2 billion in assets since its inception on 5/5/11. By adding an extra layer of protection to mitigate interest rate risks, the new ETF could be appealing to investors who are sensitive to interest rate changes.

3) Americans Define Financial Success as Being Able to Retire Comfortably
    Planadviser | 4/9/2015

Because… The ability to retire comfortably has replaced home ownership to become the earmark of financial success, according to the AICPA survey. This change is positive as it can drive people to reconsider their goals and savings behaviors. With a clear vision in mind, individuals would be more motivated to set detailed and meaningful objectives, establish financial priorities, and put financial planning into perspective. Meanwhile, financial firms could use this change as a starting point for investor education. A few firms have developed interactive tools that enable people to visualize their dreams for the future and encourage them to turn dreams into executable actions.

Total estimated outflows from long-term mutual funds were $2.12 billion for the week ended Wednesday, April 1, according to the Investment Company Institute (ICI). For the first time since early January, bond funds fell into negative territory with investors pulling nearly $1.4 billion from Taxable Bond while Municipal Bond managed to gather $96 million. Withdrawals are reportedly due to the April 15 tax filing deadline. For the second consecutive week, stocks posted in the red due to the $3.3 billion pulled from Domestic Equity, which could not compensate for the nearly $1.8 billion that World Equity collected. Hybrid funds garnered $720 million in net inflows.

Source: Investment Company Institute

Don't Miss This (4/7/15)
1) Merk to Liquidate the Hard Currency ETF
    SEC Filings | 4/6/2015

Because… We had high hopes when Merk, which has the slogan “The Authority on Currencies,” launched the Hard Currency ETF three years ago, so the fund liquidation came as a surprise. The strong U.S. dollar, market conditions, and investors’ lack of enthusiasm for hard currency funds may have contributed to the fund’s inability to survive. The management of currency funds requires expert assessment of global economies, and market inconsistency is adding difficulty to interpret currency movements. This fund closure shows that it can be hard to gather assets even for a firm that specializes in currencies.

2) BlackRock Shakes Up Money Market Offerings Ahead of Impending Regulatory Changes
    Forbes | 4/7/2015

Because… Fund firms take different approaches to comply with new SEC regulations. No matter how fund providers plan to adjust its money market fund lineup -- be it fund conversions and mergers or the institution of redemption gates and liquidity fees -- they need to explain product changes and potential cash management options to shareholders who are unaware of the rules, ensure they understand the impact on their investments, and help them make informed decisions that satisfy their needs for liquidity, stability, or higher yields.

3) Target-Date Mutual Funds Have Better Investor Returns Compared with Broad Range of Investment Categories, According to Morningstar Research
    Morningstar | 4/7/2015

Because… The latest Morningstar report has some notable findings. On one hand, index-based target-date series outpaced actively managed peers in 2014. On the other hand, more alternative investments have been incorporated into target-date funds. To the benefit of investors, the addition of alternatives, which have higher expense ratios, did not seem to increase the overall expense ratio as “the target-date industry's asset-weighted expense ratio fell to 0.78% in 2014 from 0.84% in 2013.” We expect the adoption of index funds and alternatives to continue for target-date funds.

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

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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