Cerulli: Most asset managers see product differentiation as key challenge

By National Underwriter

National Underwriter


By Warren S. Hersch

Most asset managers view product differentiation as their primary challenge, according to a new report.

Cerulli Associates, Boston, published this finding in the August 2012 issue of “The Cerulli Edge: U.S. Asset Management Edition.” The monthly publication analyses topics related to product development and strategy, distribution, pricing and market segmentation.

Of the registered investment advisors surveyed, 41 percent say that “differentiating their offering in a crowded marketplace” is their primary challenge.

Smaller percentages of the respondents identify fee pressure from broker-dealers and managed account groups (24 percent), industry regulation (12 percent), lack of focus on retirement planning (12 percent) and increased competition from low-cost options, such as ETFs and index funds (6 percent), as their primary challenge.

Registered investment advisors with assets under management of between $100 and $250 million and between $250 million and $500 million experienced the most significant change in market share between 2008 and 2010. The market share garnered by RIAs in these AUM segments grew to 10.5 percent and 4.2 percent, respectively, in 2010, up from 8 percent and 3.6 percent, respectively.

Their gains in market share, the Cerulli report states, came largely at the expense of RIAs holding less than $100 million in assets. These RIAs saw cumulative losses in market share over the three-year period of 2.2 percent.

The report also reveals that mid-size RIAs (those with more than $500 million in AUM) are more likely to use mutual funds than their counterparts with larger practices. Nearly half (49 percent) of mid-size firms use mutual funds, as compared with 39 percent of RIAs with greater than $500 million in AUM.

The report observes, however, that mid-size RIAs are less likely than larger practices to use individual securities (18 percent versus 23 percent), alternative investments (5 percent versus 9 percent), and separate accounts (5 percent versus 14 percent).

Cerulli estimates that 6 in 10 (61 percent) of asset managers practice in teams, as compared to 39 percent who are solo practitioners.

Originally published on LifeHealthPro.com