Even though direct marketing dominates mutual fund distribution channels, direct marketers are increasingly embracing tie-ins with intermediaries, Kurt Cerulli, principal of Cerulli Associates, told a conference sponsored by the Practising Law Institute in New York recently. Cerulli is a mutual fund research and consulting firm based in Boston.

Direct marketing accounts for 39 percent, the largest single share, of mutual fund distribution, Cerulli said. Wholesaling through a fund supermarket or wirehouse is next, at 34 percent; proprietary sales through money managers, financial planners and independent broker/dealers comprise 15 percent; and institutional sales through banks and insurance companies comprise 12 percent, he said.

But direct marketers are increasingly turning to intermediaries to help sell product, Cerulli said. Intermediaries are now responsible for 54 percent of direct marketing sales, while only 46 percent is actually from direct marketing efforts alone, Cerulli said.

"Increasingly, wholesale distributors are getting money streams from money managers and financial planners," Cerulli said.

And the terms of the deal between the mutual fund company and the intermediaries is changing, he said. Whereas money managers and financial planners traditionally receive asset-based fees, commission-based sales dominate their agreements with mutual fund complexes.

"Mutual funds are making partnering and revenue-sharing a prerequisite for sales," he said.

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