Banks and insurance companies, the newest entrants into investment fund distribution through third party advisors, are gaining serious ground against the well-established independent firms, according to new research from Credo Consulting Inc.

According to the study, Winning in the Advisor Ranks — Balancing the Art & Science of Success for Canadian Asset Management Firms, just released by Credo, the average investment fund assets of bank/insurance companies at IDA advisors and MFDA advisors have grown at four times the rate of the independent firms in the past two years.

Credo says these growth rates do not include the assets of proprietary or related sales forces, such as a bank’s own brokerage firm. In fact, one bank executive stated that often their own related sales forces are a tougher sell than other IDA firms.

These findings are based on an in-depth data collection and qualitative interviews in June 2005 with eight sample group firms, half of which are owned and operated under the corporate umbrella of a bank or insurance company.

The study provides comprehensive data on the costs associated with the distribution of mutual funds in the Canadian advisor marketplace.

“When we first conducted this study five years ago, the independent firms were the only players that were succeeding in the advisor channels. Now, the channels distinctions are much more blurred with financial institutions with solid branding and deep pockets competing successfully against the established independents,” says David Enns, partner at Credo.

Other key findings from the study include:

  • The average Tier One firms (with assets under management over $15B in the advisor channels) are budgeting just under $25 million in direct sales and marketing expenses for 2005, a modest 5.2% increase from 2004.
  • Banks/Insurance firms are experiencing greater productivity than independent firms by generating $63 million in gross sales per sales team member (sales staff full-time equivalent) versus $49 million at independents.
  • Sales & marketing areas expected to see the largest relative increases in spending include sales staffing, advertising and Web-internet related expenses.

Clients of Vancouver-based Credo include leading asset managers and distributors that represent 90% of the assets under management in Canada.