Asset Managers Leverage End-Investor Data for Product Diversification Initiatives
November 11, 2021 — Boston
Using end-investor data to understand industry trends and demand for products and strategies can provide competitive advantage
New investment vehicle offerings (85%) and new active investment strategies (80%) are top-of-mind for product development efforts among asset managers. As plans and priorities shift beyond mutual fund, exchange-traded fund (ETF), and separate account wrappers, particularly for multi-asset-class and international/global asset classes, managers are looking to end-investor data to inform such initiatives, according to the latest Cerulli report, U.S. Product Development 2021: Aligning Product Development and Client Objectives.
According to the research, end-investor demographics and attributes influence a wide range of product development initiatives, with five different types of initiatives influenced by the data for at least 50% of firms. Managers plan to leverage this data for new investment vehicle offerings (85%), new active investment strategies (80%), choosing distribution partners (70%), and existing product marketing (60%). “Individual client data points, along with correlations among the data points, can lead to key findings that can inform product development decisions,” comments Matt Apkarian, senior analyst. “Monitoring these trends can help asset managers find opportunities with enough lead time to bring products to market that will benefit from shifts.”
Driving the need for end-investor data is a focus on expanding and diversifying product to thematic funds, active investment strategies, and new vehicle structures. “New and unique ideas that fit into a client’s portfolio are more likely to succeed when supported by demographic shifts in the industry. Alignment of third-party resource data and data from a firm’s true investor base will help product organizations understand whether they can break into niche product areas and share classes,” states Apkarian.
The end-investor attributes that matter most to managers are risk objective (70%), advice orientation (48%), and wealth tier (43%). Given firms’ expansions of multi-asset-class offerings such as target-date and allocation products, analysis of risk objective data has a clear place in product development. “Model portfolios, which many product teams view as the future of asset management, rely on establishing suites of products that can accommodate the risk profile of any investor,” comments Apkarian. “Advice orientation in product development aligns with growing interest in model portfolios as financial advisors increasingly use them as part of their portfolio construction process,” he adds. The consideration of demographic information for both advisors and end-investors, especially as generational and gender wealth transfer occurs, is also critical. “Understanding how and when wealth is being transferred can protect firms from losing assets as they change hands,” says Apkarian.
The research suggests asset managers dedicate appropriate resources to understanding their end-investor and financial advisor client base. “Using various resources and methodologies to gather data and understand directional shifts in product use will give product organizations advantages when managing their existing and future product lines. Managers should consider the cost and value of data, considering the appropriate frequency of data needed and the accuracy of data collected,” concludes Apkarian.
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