Do you really know your distributor?

As Albert Einstein said, “Any fool can know. The point is to understand.”

Do you really know your distributors? Do you understand how they are selling your products?

It is a straightforward question: who is distributing your products and to what extent? However, time and again, asset managers fall foul of being able to provide a clear and demonstrable answer to this question, and the regulators have noticed. As asset managers grapple with continuous, increasing, regulatory scrutiny–including the upcoming implementation of the UK Consumer Duty Act–one of the biggest challenges they face is delivering robust distributor oversight without adding significant FTE and associated costs. Having a sound understanding of their distributors is essential and failing to demonstrate this carries significant commercial and regulatory risk. This challenge is amplified for asset managers with international footprints and a need to standardize their operating model to adequately meet differing levels of regulation and market or client segment expectations. Distributor oversight is a regulatory requirement for asset managers. However, industry leaders are doing more than just address it tactically. Some have taken the initiative to think bigger and used the regulation as a catalyst to drive transformation for their future distribution support models – ensuring that they are better placed to meet ongoing regulatory changes as well as their future strategic growth ambitions.

“Be in no doubt: the Duty will be a significant shift in what we expect of firms. It means making lasting changes to culture and behavior to consistently deliver good outcomes… We have identified 30 firms that need to do more to help struggling customers and will investigate the activities of 40 more.”

Sheldon Mills, Executive Director, Consumers and Competition at the FCA

What are the key distributor oversight considerations for asset managers in 2023?

ORGANIZATION MODEL & GOVERNANCE RE-DESIGN	Open, global, multi-ManCo, multi business line enabled model Greater clarity of roles & responsibilities Measurable team and individual accountability Improved reporting to regulators and committees
MAXIMIZING VALUE FROM TECHNOLOGY	A repeatable and streamlined approach to oversight processes and associated workflows increasing overall efficiency and decreasing operational risk An architecture that is set up to enable future expanded application
DEFINING GOOD PRACTICE DATA MASTERING FRAMEWORKS	Ability to readily obtain insightful data sets, dashboards, and documents to aid business decisions and mitigate risk Oversight of distributor relationships globally and throughout the entire client lifecycle Decrease in manual intervention required by individuals, limiting user error and freeing up resource for value added activities
ENHANCING AND GLOBALIZING PROCESSES	Consistent global client experience, with expectations suited to segments and regions Enhanced and accurate resource allocation with increased oversight of process requirements and pinch-points Increased predictability of processes

What are the potential benefits for asset managers in addressing distributor oversight?

The name of the game for asset managers in 2023 is scaling and improving service propositions to drive efficiency and minimize costs. When market conditions are challenging, asset managers need to find ways to do more with less, making the most of existing headcount and fully utilizing technology and data to reduce cost and effort.

The challenging market background also places even greater emphasis on client service and trust between asset managers and their clients. By implementing stringent practices and regularly engaging with distributors, asset managers can ensure their clients are serviced in compliance with all applicable regulations. Additionally, it allows asset managers to deliver timely customer service which ultimately contributes towards an exceptional customer experience overall.

Distributor oversight requires comprehensive processes to achieve maximum success. Industry-leading models are scalable as well as efficient, and enable support of multi-jurisdiction clients who are often strategically important to asset managers. This prevents duplicative steps, and removes friction points and burdensome procedures.

In Alpha’s experience, there is ample opportunity to achieve these benefits in the distributor oversight space and beyond into distributor servicing.

Alpha is already helping a number of our clients revise their servicing model in response to changing regulatory and client expectations in the distributor oversight space. If you are facing similar challenges, or are interested in an exploratory conversation, please do not hesitate to get in touch with Alpha here.