The ongoing consolidation in the private banking industry in Asia is a good opportunity for fund distribution platforms, the managing director of Fund Channel has said.
Speaking to Citywire Asia, Richard Lepere said: ‘Consolidation is music to my ears because it facilitates, on the part of the distributors, the acceptance of what we have to offer.
‘When you are operating in a business that is profitable and you are having a nice and easy time, if somebody talks to you about cost-savings and efficiency, it’s not very high on your agenda.
‘If you are in an industry where consolidation is ongoing, people will pay a lot more attention to the benefits of your offering and how it affects their topline and bottomline growth.
‘The challenge for us however is to identify the winners and losers of the consolidation,’ he said.
Founded in 2005, Fund Channel offers its 100 distributor clients -- private banks and insurance companies – a range of integrated services covering all logistics related to the distribution of Ucits.
On the other side, its B2B distribution platform administers around 45,000 funds from over 400 management companies.
It extended its presence to Asia with the opening of a branch in Singapore in March, having started operations in January.
The Singapore office is meant to be purely client-facing with support from Luxembourg, Fund Channel’s headquarters.
‘The goal for Singapore is 5 billion euros in assets under distribution. The moment we onboard our first client, we will have to start expanding the team,’ said Lepere.
Fund Channel is currently in talks with 20 distributors.
It is a joint venture owned by Amundi Group (50.04%) and BNP Paribas Investment Partners (49.96%).
From early conversations with private banks in Singapore, Lepere has found a problem similar to what he encounters in Europe.
‘It takes time to sign agreements with the asset managers – that’s the main problem.
‘People pay attention to the facilitation and efficiency we can bring to the process.
‘They are also keen to hear from our experience in Europe because the regulatory landscape is changing there. So all the talk about investor protection, transparency on costs and charges, product suitability and appropriateness, target market and product governance are significant,’ said Lepere.
Fund Channel is also capitalising on the growing regulatory reporting requirements globally.
‘The regulatory trend is pushing all of us in the direction where asset managers have to have an ongoing oversight responsibility on their distributors.
‘So every year they send out distribution due diligence questionnaires to be filled out by the distributor, which we do on their behalf. There again, our benefit is clear.’
Fund Channel’s contracts with distributors are based on a back-to-back principle.
The digital wave has not missed Fund Channel, which digitalised the collection, storage and monitoring of custodian certificates under Lepere’s stewardship.
It has also developed an online platform for distributors and fund houses. On the distributor’s interface, I t displays the daily estimated trailer fee, how much the asset manager has been invoiced and fees received from the asset manager. ‘They can see the aggregate amount and they can drill down, ISIN by ISIN.’
It also makes available official fund documents – prospectus, investor information etc. - that the distributor has to make available to clients at the time of subscription.
‘Another illustration of our transparency is that in certain countries in Europe, when you want to buy a fund, they have to tell you what the management fee is and what the commission is for the bank. We send distributors files with management fees and trailer fees.’
However, a lot remains to be done, according to Lepere.
‘There are vast amount of inefficiencies in the fund distribution space and they have to be reduced to cut down costs.
'One future development I see coming is a standardised distribution agreement -- why should they be different in a particular marketplace?’ he said.