FRC projects that mutual fund net sales will grow at 2% annually, reaching $340 billion by 2012. Starting from much smaller asset bases, other products will grow at eight times the rate of mutual funds, according to FRC’s new study, Mutual Fund Market Sizing 2007-2012: An Analysis of Channels, Sales, and Assets.This report provides a forward-looking examination of the trends and behaviors impacting the future of mutual fund sales through each of the six intermediary channels (national brokers, regional brokers, independent brokers, banks, insurance carriers, and RIAs). For each channel, the study provides firm rankings, advisor concentrations, gross sales, net sales, assets, and growth rate projections through 2012, as well as key trends shaping the future of mutual fund distribution.
Market Sizing also supplies a detailed cross-channel analysis of mutual fund distribution, providing guidance on how sales will be distributed among Direct, Intermediary, and Retirement & Institutional channels. Finally, the study looks at the impact other products (including ETFs and managed accounts) will have on future net sales of mutual funds.
“Mutual funds are facing increasing competition from ETFs, managed accounts, and hedge funds, all of which will see double-digit annual growth in net sales,” said Ian Rubin, lead study author and senior vice president of retail investment markets research.
“Another significant shift we project is the continued increase in gross sales via the intermediary distribution channels relative to the other channels,” said Rubin. “Gross sales through intermediary channels will represent 61% of sales by 2012, a significant increase from 50% in 1999. That growth will come at the expense of the Direct-to-Investor channel, which will continue to atrophy significantly.”
Other key findings in this study include:
Turbulence for the National Brokers – “The next few years will be an inflection point for the national broker, or wirehouse, channel,” commented Rubin. “Several important dynamics are converging on the wirehouses that will impact their composition and long-term success. Among the issues are Wachovia’s purchase of A.G. Edwards, which may trigger a series of other mergers that could fundamentally alter the distribution strategies of fund companies, the growing use of alternative products, and the increasing influence of due-diligence groups at the home-office level in selecting products for distribution through their advisor forces.”
Strong Asset Growth for the Independents – Sales of mutual funds through the independent channel are expected to rise consistently over the next five years. FRC estimates that mutual fund assets held in the channel will reach $830 billion by 2012, a CAGR of 12%. The number of independent advisors has doubled over the past three years due to advisor migration to the channel and the transition of larger firms, such as Ameriprise, to the independent category. In 2005, advisors in the channel totaled 77,000, a number that has since risen to 145,000.
Rise of the Bank Channel – “Over the next five years, we see the bank channel growing quickly, and improving its positioning relative to other intermediary distribution channels,” said Rubin. “We forecast banks will experience strong growth in both net sales and assets. This growth will be driven by several changes in the banking industry, including the wave of mergers and acquisitions, the use of platform programs to service the lower end of the investor wealth spectrum, and the move toward broader open architecture to improve asset and fee generation.”
For more information on this FRC study or to schedule an interview with the study author, please contact Trisha Langlois at FRC at (617) 824-1204 or via e-mail Trisha.Langlois@frcnet.com.
Market Sizing also supplies a detailed cross-channel analysis of mutual fund distribution, providing guidance on how sales will be distributed among Direct, Intermediary, and Retirement & Institutional channels. Finally, the study looks at the impact other products (including ETFs and managed accounts) will have on future net sales of mutual funds.
“Mutual funds are facing increasing competition from ETFs, managed accounts, and hedge funds, all of which will see double-digit annual growth in net sales,” said Ian Rubin, lead study author and senior vice president of retail investment markets research.
“Another significant shift we project is the continued increase in gross sales via the intermediary distribution channels relative to the other channels,” said Rubin. “Gross sales through intermediary channels will represent 61% of sales by 2012, a significant increase from 50% in 1999. That growth will come at the expense of the Direct-to-Investor channel, which will continue to atrophy significantly.”
Other key findings in this study include:
Turbulence for the National Brokers – “The next few years will be an inflection point for the national broker, or wirehouse, channel,” commented Rubin. “Several important dynamics are converging on the wirehouses that will impact their composition and long-term success. Among the issues are Wachovia’s purchase of A.G. Edwards, which may trigger a series of other mergers that could fundamentally alter the distribution strategies of fund companies, the growing use of alternative products, and the increasing influence of due-diligence groups at the home-office level in selecting products for distribution through their advisor forces.”
Strong Asset Growth for the Independents – Sales of mutual funds through the independent channel are expected to rise consistently over the next five years. FRC estimates that mutual fund assets held in the channel will reach $830 billion by 2012, a CAGR of 12%. The number of independent advisors has doubled over the past three years due to advisor migration to the channel and the transition of larger firms, such as Ameriprise, to the independent category. In 2005, advisors in the channel totaled 77,000, a number that has since risen to 145,000.
Rise of the Bank Channel – “Over the next five years, we see the bank channel growing quickly, and improving its positioning relative to other intermediary distribution channels,” said Rubin. “We forecast banks will experience strong growth in both net sales and assets. This growth will be driven by several changes in the banking industry, including the wave of mergers and acquisitions, the use of platform programs to service the lower end of the investor wealth spectrum, and the move toward broader open architecture to improve asset and fee generation.”
For more information on this FRC study or to schedule an interview with the study author, please contact Trisha Langlois at FRC at (617) 824-1204 or via e-mail Trisha.Langlois@frcnet.com.
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