WELLESLEY, Mass.—Mutual fund wholesaling isn’t what it used to be. Today, highly sophisticated gatekeepers at broker/dealers go by the name of “Fund Selection Units,” where they hold mutual funds up to a whole new set of demanding criteria akin to the rigors that pension plans put investments choices through.  

At the same time, the percentage of sales through independent registered investment advisors and small B/Ds is on the rise. Combined, these two sales trends are having the effect of raising the cost of distribution and making the mutual fund industry even more competitive, with the top three giants—Fidelity, Vanguard and American Funds—dominating the industry even more.


This was one of the key points that speakers drove home Monday at the National Investment Company Service Association’s General Membership Meeting here, held at the Wellesley Country Club.


“Today, the focus is very much on how the fund behaves in the marketplace, rather than on whether it has four or five stars,” said Darlene T. DeRemer, a partner with financial services investment banking boutique Grail Partners. “Increasingly, as the market becomes more institutional, there are fewer 12b-1 fees,” and margins that have historically averaged in the remarkably high 35% range are coming down, DeRemer said.


“Building relationships is not all there is,” concurred said Jack Sharry, senior vice president, alternative retirement solutions at The Phoenix Companies. “Today’s wholesalers must have a firm grasp on capital markets, and a lot of our own wholesalers are analytical.”


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