B-Ds May Pull $850B From U.S. Funds
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Wednesday, September 14, 2011

B-Ds May Pull $850B From U.S. Funds

Mutual fund firms with substantial core U.S. equity business may want to start diversifying their lineups. kasina warns that distributors could pull more than $850 billion net out of U.S. mutual funds if they adjust to a 60/40 allocation between U.S. and international investments.

"Distributors are in the process of realigning [away from U.S. equity]," Steven Miyao, CEO and founder of kasina, told "That obviously presents a huge threat for organizations that don't have other strategies."

That tidbit is part of kasina's newest study, "Meeting the Needs of Tomorrow's Distributors," drawn from surveys and executive interviews from Ameriprise, Commonwealth, Edward Jones, Merrill Lynch, Morgan Stanley Smith Barney, Raymond James, Schwab and UBS. kasina also warns that broker-dealers' home-offices will influence (directly, via home-office-built models, or indirectly, via recommended lists and advisors who mirror their home-offices' models themselves) an even higher percentage of advisors' assets, 77 percent in 2015, up from 58 percent now.

"There is a lot more fiduciary responsibility that is going to be put on to the distributors," Miyao said.

Company Press Release

New York, (September 2011) – Distributors are changing the way they do business, leading them to seek creative, new alternatives from asset managers. But distributors are frustrated, faced with an unresponsive asset management industry that puts out a glut of undifferentiated, core products painfully out of step with their changing needs, according to kasina’s newest study: Meeting the Needs of Tomorrow’s Distributors. The disconnect has left distributors disaffected and disloyal to the product providers they work with, at a time when the growing importance of research and fee-based solutions should have precisely the opposite impact, drawing distributors and asset managers into a tight partnership.

As distributors evolve, asset managers need to adapt to distributors’ heightened expectations to stay competitive. “Three key trends are occurring at forward-thinking distributors: research teams are more powerful and controlling more flows, product needs are shifting, and distribution is globalizing,” says Steven Miyao, CEO and founder of kasina.

The changing distribution landscape presents a breadth of challenges for responsive asset managers. kasina estimates firms can expect aggregate net outflows of over $850 billion in U.S. mutual funds if distributors reduce to a 60/40 (U.S./International) allocation. Outflows will come from core products which have already seen $201.8 billion in net redemptions in the past four years. “Most products have cyclical flow patterns but because of the shifting dynamics at distributors, this is not likely the case for core U.S. equity,” says Miyao.

The power of the home office will also increase in the next five years. By 2015, 77% of advisor assets will be influenced by distributor home offices. That’s compared to the roughly 58% of assets now influenced by home offices. But few asset managers are in a position to leverage key opportunities presented from the changes occurring at distributors.

Analysis of data garnered from surveys and interviews with executives from nine of the industry’s largest distributors, including Ameriprise Financial, Commonwealth, Edward Jones, LPL, Merrill Lynch, Morgan Stanley Smith Barney, Raymond James, Charles Schwab, and UBS. The 36-page report details best practices and recommendations for building loyalty among research analysts, aligning product development with distributor needs, and creating solutions around the needs of global distributors. kasina also introduces the kasina Gatekeeper Index (kGI), a quantitative assessment of how well asset managers are serving distributor needs.

For more information on the full report, Meeting the Needs of Tomorrow’s Distributor, or to learn about kasina’s other studies, visit

About kasina

kasina's commitment to innovating distribution in the financial services and insurance industries has made it one of the most influential strategy consulting firms in its sector. kasina works with a wide variety of clients from five continents, including firms representing 90% of total assets under management in the U.S. An overview of services offered by kasina is available at

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