BLOG. 3 min read
In today’s rapidly evolving landscape, asset managers face increasing pressure to innovate and adapt. One critical area where this need for adaptation is most evident is product development. In our recent report, we outlined a four-point framework for product rationalization, optimization and development (“PROD”) that asset managers can use to analyze products in development and products on the market.
One of the key pillars of the PROD framework is distribution demand, and understanding distributors' needs, interests and ways of thinking—particularly that of their home-office research and due diligence teams—which is essential in any product development process. As we have written in previous blog posts, research and due diligence teams have been begging their partners to have a better understanding of their needs and business for years. While we cannot say for certain whether product providers, as a whole, have bridged this gap completely, findings from our recent Productivity Insights surveys of both asset managers’ product teams and broker/dealers’ research & due diligence teams indicate that the product strategies of both sides are becoming more aligned.
Home offices want to provide their advisors with greater choice for clients through strategies like alternatives, direct indexing and custom SMAs versus adding more options in the traditional equity style box. This desire to expand the breadth of vehicles and strategies available on platforms can be seen below, as most due diligence teams are prioritizing adding at least one active ETF, SMA, or interval fund to their platform in 2024.
Source: SS&C Research, Analytics, and Consulting, Productivity Insights Broker Dealer/Gatekeeper Research/Due Diligence Team Survey 2023
Product teams have echoed identical product priorities for 2024, with most focused on launching at least one active ETF, SMA or interval fund. Additionally, when both due diligence and product teams were asked which wrappers would be most in demand during the next 12–18 months, a resounding majority on both sides named one or more of those three vehicles. This level of agreement from both sides of the aisle is not just a coincidence but a byproduct of the economic and market environment, as well as a greater understanding of their most important partners’ needs.
Source: SS&C Research, Analytics, and Consulting, Productivity Insights Product Strategy & Management Team Survey, 2023
We found plenty more evidence from these two surveys to support the claim that product strategies from both sides are becoming increasingly aligned. The final piece that cemented our deduction was asking each group about their top business priorities. The most prevalent priority among due diligence teams (70% of firms) was filling out the product shelf with new wrappers, while the most common initiative among asset managers’ product teams (71% of firms) was expanding the range of investment vehicles/capabilities.
Over the past several years, important buy and sell decisions have increasingly been centralized within research/due diligence teams at every major distributor. It has never been more important for product providers to work with distributors to understand the causes of home-office shelf space openings, how products are evaluated, how they are used in a pre-packaged model, and how different investment vehicles fit into a distributor’s business model. I believe the examples of increased alignment from these two surveys indicate that the gap in understanding between the two sides is shrinking and that asset managers are listening and adapting to the ever-evolving needs of distributors. This alignment enhances market reach, improves product fit, increases efficiency, fosters collaboration and ensures competitiveness. By prioritizing this alignment, asset managers can position themselves for long-term success in a dynamic and competitive market.
To better understand the needs of wealth managers, and how asset managers can best meet those needs, learn more about our research.
