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    Here are the highlights of the Global Distribution Conference: videos, photos & reports! october 6, 2014    
          in this edition      
         
 
   

23rd edition, 800 participants from 25 countries...

This year, the ALFI Global Distribution Conference on September 23-24, organised in co-operation with NICSA and HKIFA, the industry associations of the US and Hong Kong, was attended by around 800 delegates from 25 countries.

Have a look at the conference video!                                       

Key trends, challenges and opportunities by Marc Saluzzi

In his introductory speech, the chairman of ALFI, Marc Saluzzi, set the scene: ‘For the first time in years, we might be able to focus a little bit more on the business and not so much on regulations. A unique moment to enjoy before Brussels resumes its activities later this year.’ And indeed, the expert panelists and keynote speakers used the opportunity of this unique industry gathering to talk about the latest evolutions and trends affecting their daily business, with a special focus on the distribution of investment funds worldwide.

Have a look at the pictures by clicking on the photo below!

Have you seen the conference trailer? If not, you still have a chance to hear the industry experts discussing the key distribution megatrends!

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Ban on inducements

The existing Retail Distribution Review (RDR) in the UK and the forthcoming MiFiD II Directive came under intense scrutiny at the conference. Both have as one of their principal aims to ban inducements from fund promoters to independent advisers.

Overall, the feeling was that a ban on inducements does not necessarily benefit the end investor. Indeed, many participants thought that by banning commissions the result would be a narrower range of choice and less competition in the market. As one speaker put it, a ban may 'cause a retreat from open architecture in Europe, as banks move customers into their own products. This would be a return to the late 20th century and negative for end users'.

 

Meanwhile, as regards MiFiD II, which is due to be implemented in January 2017, fears were expressed that investors with less than 125 000 EUR would be taken out of the market for advice. 'It only protects the wealthy,' one panellist said. 'Do high net worths need more protection? I don't think so.'

Bella Caridade-Ferreira, director of Fundscape LLP, presented a study commissioned by ALFI on exactly this topic. Called 'Navigating the post-RDR landscape in the UK; assessing the potential impact of an RDR regime on the European fund industry', one of the findings of the study also points to an advice gap resulting from RDR. Nonetheless, as one of the major lessons from the studies, Ms Caridade-Ferreira concluded that 'regulators and the industry need to work together to ensure clients of all sizes can access affordable advice and investment products that can ultimately drive significant growth for our industry and lead to more satisfied investors'.

Check the video presentation by clicking on the image below!

Lessons from RDR

Bella Caridade-Ferreira, CEO, Fundscape

“The advice gap that has arisen in the UK through the RDR demonstrates the need for positive engagement by the industry with the regulator to influence the overall direction of travel and outcomes.”

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Oversight of the distribution function

So much new regulation focuses on distribution and yet, a show of hands at the conference revealed that very few fund management professionals are fully satisfied with control or oversight of the distribution function at their respective firms. A dedicated panel reckoned that one reason for this is that regulation of distribution is much less detailed than investment regulation. The complexity of different fund channels in different jurisdictions may mean that regulators can only lay down broad principles.

The challenges of controlling distribution are increased by intermediation. It was pointed out that most asset management was intermediated and this meant it was not always easy to find out who the end user is and what they need. The challenge was illustrated by one panellist’s straightforward question: ‘When was the last time we sat at a table with an end investor?’ Food for thought…

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Political stability

When Luxembourg's government unexpectedly changed last year, some observers and market participants feared that the new government would be less sympathetic to the funds industry. Experience has shown these fears to be unfounded and the commitment of the current government to the industry was reinforced by H.E. Pierre Gramegna, Luxembourg's Minister of Finance. Mr Gramegna told conference delegates: 'We have a new government and a new Minister of Finance, but we will do our utmost to continue with what has been done in the past – who wants to change a success story?'

However, he insisted that some changes would be necessary. 'Transparency is an irreversible trend,' Mr Gramegna said. 'We will enlarge the scope of the automatic exchange of information and this increased transparency will be an additional boost for the Luxembourg financial centre.'

Marc Saluzzi said the government had already pledged to support the industry over issues such as the proposed Financial Transaction Tax (FTT). 'We are determined to communicate our opposition on FTT and we know we can count on the support of the Luxembourg government,' said Mr Saluzzi.

 

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Growth of Socially Responsible Investing (SRI)

For the first time at a major ALFI conference, there was a dedicated SRI panel, demonstrating not only the rising importance of SRI to investors, but also ALFI's ambition to further raise awareness of the benefits of SRI.

It was widely agreed that SRI strategies are no longer niche 'nice-to-have' investments that formed part of satellite portfolios. 'Fund managers must now integrate SRI risks in all their products. Do it in five years and it's too late,' said one  practitioner. Thomas Seale, CEO of European Fund Administration, agreed but added a warning: 'The SRI train has left the station, you better jump on before it's too late.'

Investors were warned to steer clear of firms who made 'green' claims but did not act on them. However, it was felt that it is actually easy to spot investment firms who 'green wash'. 'They produce PR reports instead of showing responsible principles in their investment models and strategies', concluded one panellist.

Thomas Seale, CEO of European Fund Administration (EFA)

“We have seen 20% growth in the responsible investing sector, with more and more institutional investors, high net worth individuals and retail investors interested in seeing their money invested in a responsible way.”

https://vimeo.com/user19275722/review/109915644/e118055dc2

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Distribution in Asia

Opportunities for the fund industry in Asia are well known and most fund managers have their eyes on the fast-growing region. Lieven Debruyne, chairman of the Hong Kong Investment Funds Association, noted that investment business was booming in Asia. 'Hong-Kong-domiciled funds have risen by more than 50% year on year and assets have doubled,' he said. Meanwhile, conference participants noted that UCITS, with their long track-record as well-regulated products, would remain relevant in the region. Participants further analysed how to devise a distribution strategy for Asia, recognising that Asia is full of astute investors who are often more tech-savvy than in Europe.

Technology was a recurring theme of the conference. Theresa Hamacher, President of NICSA, stressed this point: 'The challenge is to convince millennials to save like baby-boomers,' she said. 'New models for financial advice will use a high-tech component.'

A leitmotiv of the conference was that the asset management industry needs to challenge itself and continuously ask itself whether it is 'still doing the right thing'. The presentations and discussions showed that this challenge has been accepted!

 

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Post-crisis priorities for pension funds

Nick Sherry, Australian senior adviser on superannuation, Citigroup Pty Ltd.

“Transparency, openness and fees are all assuming more importance for pension funds in the post-crisis environment of lower returns, whilst at the same time funds are always looking at more diverse ways to invest and newer, broader product options.”

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