Return of the self preservation society
A pattern is emerging of retail banks recommending internal products to their customers, but there is still room for the independents
Against a landscape of financial hardship for European citizens trying to make ends meet and institutions attempting to preserve corporate earnings, the natural instinct is one of self-preservation, to keep it in the family. Across Germany, France and the Benelux countries, those retail banks previously showing some commitment to selling best of breed products to their customers, from a broad menu of asset managers, are starting once more to recommend funds manufactured by their sister investment groups. German banks Commerzbank and Deutsche were the first domestic European institutions to respond to customer demand for more and better investment products. If they could not sell products of UK and US managers through their branches, then wily customers, used to obtaining performance data on the internet, would cross the road to other banks for a broader selection. This paved the way for Fidelity, Schroders and BlackRock, which is about to absorb BGI, to make a strong Continental footprint through bank network distribution. But speak to both managers and banks and a new pattern is emerging. Clearly ‘fund picks’, recommended to advisers at Deutsche branches are now predominantly from internal manufacturer DWS. The German funds group is currently selling more products than most competitors. This renewed captive distribution effort is not doing the Deutsche machine any harm. Down the road at Commerzbank, the story is similar. In recent years, as performance of former in-house entity Cominvest improved, bank branches sold more own-brand funds, at the expense of international houses. Now that Dresdner Bank has joined Commerz, with Cominvest offloaded to insurance giant Allianz as part of the merger deal, it would appear that independent selection might be back on the agenda. Not so. The fund management world does not work that way. Interests are always protected after a merger. A backroom deal has already been struck with Allianz Global Investors, Cominvest’s new owner, and now the main provider of products for Commerzbank branches. In Belgium, Fortis Bank is being slowly absorbed into the BNP Paribas group. The priority of the working parties in the integration appears to be to ensure that as much BNP Paribas Investment Partners product as possible is sold through this new distribution channel. It is the truly independent banks such as Citibank and Standard Chartered, plus financial advisers, which fund houses must target to sell products in the medium term. And let’s not forget the Swiss private banks, keen to preserve market share in the post-secrecy landscape. With Julius Baer splitting off private banking from asset management, to ensure real open architecture prevails, and UBS likely to follow suit, the game for independent fund managers is far from over.
