Change can be uncomfortable, but it's often a necessity to stay in the game.

For mutual fund providers, change and adaption as it relates to technology will mean the difference between success and failure.

"I don't think the industry is focusing enough on how technology will change the landscape for mutual fund providers," says John Siciliano, managing director of asset management at PwC. The adaption of technology and embracing what he calls a "new model" of distribution - which is forcing the industry toward intermediary platforms -- will be the way for mutual fund providers will thrive.

In this Q&A, Siciliano discusses the role of technology and how RIAs will be replacing wirehouses when it comes to distribution for mutual fund and ETF providers.

Q. The distribution model for mutual fund and ETF providers is changing rapidly. How do you perceive the evolution?

We're going through a change in the industry where historically when you wanted to distribute products you'd go to a brokerage firm and you would talk with the regional manager. That's the old model, which a lot of people still do. The newer model has been developed during the last several years as brokerage firms have expanded these very sophisticated and intense research desks. And that is where you're basically going and presenting a product to these firms of 70 to 150 people on these desks with bonds, equities, alternatives and retirement products - you name it. They would come up with a recommended list that they give to the branches. The tension that's developed in the industry is whether providers distribute the old fashioned way - where you go out, take people out for a drink and play golf at the branch - or whether providers are on the research desk as the central clearing house for products.

Personally I think the latter is where the world is going because we're in an information age and that term has been around for about 40 years.

Q. What's the major difference between the old model and the new model?

The old model is more relationship driven - a town by town approach. The new model is more driven by intellectual capital and investment veracity of the products.

Q. Can both models co-exist? Why is that town by town approach a dying model?

The old model is a dying model for sure and the numbers show it. You're getting younger brokers - look at the average age of brokers at the established brokerage firms versus the average age of financial advisors at the emerging firms. What's the difference? If you're at the brokerage firm the most you ever get is 40% to 45% of commission dollar you generate. At the newer firms you get 80% to 85%.

The people at the newer firms are more interested in research and less interested in the wholesaler who comes along pushing a fund. The RIAs don't have the sophisticated software that the broker dealers have, but they're getting there.

Q. What is the implication of RIAs getting a higher percentage of commission on how providers operate?

They get a higher percent so they're more in control of their business. They tend to be more focused on the intellectual compensation of the portfolio compared to individual brokers.

Where are we in this transition from traditional wirehouse to RIA? It's clear that we're in an era where fees are very much under the microscope among regulators in the UK, U.S., Germany, Japan, Australia - you're going to see an increasing focus on fees. RIAs have a lower fee structure. They get paid more of what they generate. So that's why they're really attracting clients.

Q. Can you comment on marketing and technology and how that plays a role in terms of distribution of product distribution?

With technology, you can sit here seven years from now and the whole back end of the process has changed because of a Google or Amazon or Ebay entering into the market.

They could come in and buy a provider and change the front end because they know your buying patterns and interests. That would change the way products are distributed - millennials don't use brokers and they're conservative. Competitors could come in with products, storage ability in cloud and are more sophisticated than brokers.

Q. That could mean career risk for a lot of intermediaries. How do you think intermediaries will have to adapt?

The wholesaler model where you have to visit a broker is going away and you're ultimately going to have a redone front end that's very tech based and you're going to have a continuing pressure on fees, which is going to mean a lot of firms that are expensive will have to become cheaper or leave the business ... or get sold.

Q. What about the breadth of products. How is that changing?

There are more products in the alternatives area but you're going to see shrinking and consolidation of others - such as large cap, core, and growth. Do you need 800 to 900 large cap growth mutual funds in this country? No. Those will become commoditized products. Traditional products will shrink, innovative ones will grow.

Q. What do you say to passive proponents?

I happen to be a great believer in passive investing - PwC said in our recent asset management report that passive will triple between now and 2020 to $21 trillion in assets from $7 trillion because of low fees and transparency.

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