Fund companies are planning increased expenditures on distribution this year with technology being a driving factor. A majority of fund managers (58%) indicated in a Money Management Executive survey that they are planning to boost technology spending for distribution efforts this year. The areas of planned technology surges are led by client communication (73%), analytics (57%), social media/marketing (43%) and compliance (38%). Forty-six percent of the asset managers who took part in Money Management Executive's survey say they plan on spending more on distribution this year compared to last year. When asked what areas firms will be making distribution-related expenditures in, technology (40%) ranked tops followed by compliance (25%) and salesforce management software (25%).

AdvisorShares, one of the largest issuers of actively managed ETFs, began focusing heavily on technology for its distribution strategy upon launching in October 2008 and is looking to add continued enhancements to its platforms this year while also boosting staff. The ETF provider uses a cloud-based approach for its customer relationship management system and email marketing automation strategy. "We've taken a cloud-based approach to all things we do distribution wise," says James Carl, managing director of sales for AdvisorShares. "As a new firm, technology is our best investment."

Brian Carlson, head of distribution at Hennessy Funds, says increasing technology for distribution is a major focus this year to help achieve cost savings and improve efficiency.

The Novato, Calif.-based asset manager is transitioning its data management provider services to DST Sales Connect and will also be looking at enhancing its CRM system and integration process.

"We have to be very smart and very efficient and pick distribution mechanisms that are effective," says Carlson, who joined Hennessy Funds this past December and oversees the firm's national accounts, sales and relationship management teams.

Davidson Investment Advisors is ramping up its technology focus for distribution by installing a new "robust" CRM system six months ago. The firm's president, Andrew Davidson, says the enhanced CRM system has enabled the ability to key in on certain clients.

"We can visually see the data and collect it appropriately," says Davidson. "It allows us to be more targeted."

Targeting Clients

Targeting clients was cited in Money Management Executive's survey as the second greatest distribution-related challenge (14%) behind only managing costs (15%).

Other challenges cited include competition (11%), sales analysis tools (10%) and product offerings (8%). Chuck Baldiswieler, president of Angel Oak Capital, says fund managers are looking more to technology for distribution because of a desire to track brokerages and registered investment advisors who have the best odds of using certain products.

Baldiswieler, who joined Angel Oak in December after 18 years at TCW Funds, says his new firm is a small $2 billion shop that isn't yet focused on technology spending for distribution, but he hopes to focus on this in the near future. "It helps me target where I want to spend my time," says Baldiswieler on how technology can help aid fund companies with distribution strategies. "You get a lot of leverage out of it."

Technology Aids Marketing

In addition to enabling asset managers the ability to better strategize where to look for business, extra resources into technology is also going toward marketing strategies. AdvisorShares recently launched a blog and stepped up its email marketing efforts toward advisors.

"Technology is our friend and will hopefully help us with engagement," says Carl. "Technology is a tremendous ally for all distribution organizations." A majority of those surveyed by Money Management Executive (53%) are choosing to outsource distribution-related marketing and promotion services.

Other distribution services survey participants indicated they are outsourcing include advertising reviews (27%) and dealer contract reviews (27%).

RIAs Growing as Distribution Channel

When asked which distribution channel is growing fastest at their firm, a large number of fund managers polled by MME answered RIAs (43%). Independent broker-dealers (25%) is another distribution channel that is seeing momentum from fund companies along with direct (20%), wirehouses (14%) and regional broker/dealers (10%). Carlson says that RIAs and broker/dealers are utilized heavily by Hennessy for distribution on a national level with the wirehouse channel sometimes used locally. "The RIAs independent broker-dealers and regional broker-dealers are our lead horses," says Carlson.

Carl attributes much of the popularity with RIAs for fund manager distribution efforts to the growing number of advisors breaking away from wirehouses. Cerulli Associates projected in a report issued on March 6 that independent and dually registered RIAs will reach a 26% marketshare in assets by the end of the 2016 compared to 21% today. "There is a movement toward the fee-based model," says Carl. "Our focus is on the RIA side." Thirty-three percent of survey respondents say they plan to increase spending in the RIA channel compared to 28% with independent broker-dealers and 20% with wirehouses. Fifty percent of survey respondents indicated plans to add resources for building/maintaining relationships with specific channels this year compared to 14% that answered no and 36% who said they "don't know."

The median firm asset value of those who took part in Money Management Executive's survey is $75.5 billion. Nearly three quarters of survey participants (73%) work at firms with above $500 million in assets under management.

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