Branding underpins selection debate
Many European banks remain reluctant to publicly acknowledge the increasing role played by external sub-advisers, but attitudes are slowly changing.
Research conducted by PWM has demonstrated the importance of branding. When banks choose sub-advisers, they are often judging the brand of the external manager.
There is always a reason why Goldman Sachs Asset Management and Pimco have a higher “very good” rating than their competitors.
But until now, there has been a question mark over this ethereal concept. When a bank, insurance company or fund house searches for a third party to run its assets, selection criteria are apparently based on performance, investment style and the management team. Service levels and fees are gaining a creeping recognition.
But the brand issue is increasingly underpinning the debate on open architecture and selection of sub-advisers.
Co-branding scepticism
There is clearly a huge reluctance among European banks to give recognition to competing brands. Commonly cited is the excuse that clients will become “confused” if there is more than one institution’s name on the brochure.
Those banks which started to give shelf space to rival products two years ago, were happy to co-brand advertisements with product providers, even if it caused internal ructions.
But institutions who consider using external advisers to manage white-labelled products are less keen to display the sub-adviser’s brand. Banca Intermobiliare, for example, is sceptical of sub-advisers who compete as distributors. Crédit du Nord believes it “difficult” to sell through branches products sub-advised by a rival.
There are a few distributors, including Crédit Agricole’s funds division, HSBC’s fund selection arm Louvre Gestion and Italy’s Cariparma who go against the grain, with an openness to co-branding, even where this promotes competitors. They want to show customers that performance is more important than politics.
But the thinking is the same across the board, even if the action taken varies. Whether a sub-adviser’s brand is buried by a jealous distributor, or whether it is up in lights on the product brochure, its importance is always being judged by selectors.
The head of one major European fund house, told PWM: “When I put two managers in front of our distribution partners, they choose the one they have heard of with the best brand, even if performance is poor. If the brand is unknown, they will not even agree to me bringing them in for a beauty parade. The best of breed concept often does not exist.”
