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Portfolio > Asset Managers

Cerulli: Most Asset Managers See Product Differentiation as Key Challenge

By Warren S. Hersch

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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% 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%), industry regulation (12%), lack of focus on retirement planning (12%) and increased competition from low-cost options, such as ETFs and index funds (6%), 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% and 4.2%, respectively, in 2010, up from 8% and 3.6%, 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%.

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%) of mid-size firms use mutual funds, as compared with 39% 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% versus 23%), alternative investments (5% versus 9%), and separate accounts (5% versus 14%).

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

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