Could somebody please take the time to explain the wholesale distribution channel in depth to me or alternatively point me to an appropriate source.
I am particularly interested in how the relationship and transactions work between commercial banks and asset managers.
Thank you to anyone & everyone able to shed a little more light on this topic.
I might be able to help you out, but you’ll have to be more specific. Could you provide an example of what you’d like additional info on? There’s a lot that goes on between an asset manager and commercial banks.
Thanks, One area has been bugging me in particular, although since I’m lacking a lot of details on wholesaling in general, I’m pretty much interested in gaining as much of an overview as possible. How do commercial banks’ accounts with asset managers function? I would have thought that when a private individual buys a mutual fund, the order goes through the contracting entity and on to the investment management company which then issues the shares in the mutual fund to the investor. However, when I look at transaction volumes on the retail side, I see large amounts (8 figure numbers) moving between commercial banks and asset managers. The fees on these amounts are relatively high and do not represent what an institutional investor would pay for investing the same amount in either a segregated account or an institutional share-class. This has thrown me off quite a bit and made me wonder what is going on. Are commercial banks buying mutual fund shares in bulk and if so how does that work? I thought commercial banks were basically just connecting a private investor with the investment management company and taking subscription/redemption fees + trailer fees for their efforts. Consequently, I would have thought transaction volumes would be small but plentiful. Now the large volumes with high fees have thrown me totally off.
Just about every bank trades omnibus so all the individual transactions are rolled up into one big trade each day. But, that doesn’t mean the investor gets institutional pricing. For example, my firm has a $5MM minimum for Institutional shares that’s imposed on the individual investors, not the aggregated daily total from the bank. The flows we see from banks are pretty evenly divided between managed accounts (no fees on our end) and brokerage (A and C shares). That’s all up to the advisor at the bank. There are also trades coming from the banks for their own accounts - their wrap product. That’s still ultimately coming from an individual investor, but it gets thrown into a “house account.” For the most part, those trades are done at NAV so there aren’t any fees associated with them (from us). Hope that helps. I’m a little hungover from the Chiefs game last night, so I’m not really on my A game this morning.
Makes sense. Thanks You mentioned advisor at the bank. Would this be the same person retail sales reps at AMs meet with to pitch to or does someone else generally decide what funds will be sold on a given bank’s platform? What else is included in the advisor’s job description?
So let’s use Chase as an example. It starts with a National Accounts (sometimes called Key Accounts or Relationship Manager) wholesaler at the AM working with JPMorgan’s home office to get funds made available on their platforms. Then we (the AM) have a sales force of wholesalers that call on individual Chase advisors at the branch level. Chase basically has three platforms to choose from - brokerage, home-office discretionary wrap, and non-discretionary wrap (the last two are also referred to as managed accounts). The brokerage platform is pretty much open architecture so the territory sales wholesaler and the bank rep can pick almost any fund to discuss. The home-office wrap product is determined by the, you guessed it, home office so it’s up to the National Accounts folks to get the funds on that platform. If the advisor chooses to go with that platform, the AM wholesaler can’t influence sales. The non-descretionary wrap platform is a team effort. Chase allows the individual advisor to build their own portfolio from a list of about 200 “approved” funds. National Accounts works to get their funds on this Select List, then it’s up to the territory sales wholesaler to convince the advisor to pick our funds. I was on the territory sales side for a while, now I’m in National Accounts so I’ve gained some perspective on both sides of the fence. The advisor’s job at a bank is a little different than somewhere like a wirehouse, or large independent BD, and way different than an RIA. At a bank, you’re sitting in a branch and waiting for people to walk in with a CD that’s just matured, or whatever, and offer up other investment alternatives. You don’t have to be as proactive in soliciting new accounts as other advisors since you get the foot traffic, and you can get a good sized book of business fairly easily, but you don’t make as much on your assets as other advisors.
Very helpful. Appreciate it a lot. If anyone else has any sources to read up more on this topic please feel free to include here