We’re seeing the initial signs of a rolling back of open architecture across Europe. Distributors are increasingly focusing on building overall ‘solutions’ rather than picking best of breed funds by asset class. They are also looking to limit the range of products they use to build these solutions.

Distributors are now placing far more emphasis on cost, as well as working from a narrower range of products. So if asset managers want to be included on distributors’ panels, they need to offer more than just top quartile funds. They need to pare down their charges.

The move towards providing ‘solutions’ is also prompting greater use of discretionary/wealth management. MiFID II is accentuating this shift, because one of its side effects has been to make the administration of pure advisory business more difficult than running discretionary portfolios.

In the UK, the rise of ‘solutions’ is also leading to a revival of writing business away from open architecture platforms. Groups like Prudential and Royal London are seeing healthy inflows into their own multi-asset ranges.

We’re also seeing more widespread adoption of sub-advisory – distributors effectively running their own products with asset managers mandated to manage the underlying investments. In the UK, St. James’s Place has been doing this for years, but we’re seeing other firms start to follow suit. We’re seeing a similar picture in France with Natixis/BPCE; in Italy with Fineco; and in Spain with CaixaBank and Santander.

These trends are putting greater pressure on asset managers, particularly those using single-strategy products as the building blocks of portfolios. It’s not just performance that counts – asset managers need to forge partnerships with their distributors and fit into their solutions for clients.

In our latest European Fund Distribution Report, Routes to Market, we look at this trend towards guided architecture and other key trends emerging across Europe. For more information, get in touch.