COVID spurred positive changes in ETF Distribution model
The COVID-19 pandemic had a profound impact on the ETF distribution model, resulting in positive changes that have enhanced client engagement, prompted digital investment and forced sales teams to adapt to evolving client demands, according to a report recently published.
The report Distribution 2.0: Revolutionising global ETF distribution through technology, conducted by Blackwater a leading ETF and Digital Assets consulting and talent management firm and FLX Networks, a financial technology company focuses on ETF distribution, identified key findings that sheds light on the transformation of the ETF distribution landscape since COVID-19.
Below are some of the major conclusions of the report which is based on proprietary research and interviews with heads of Distribution, CEOs, COOs, and CIOs from more than 25 ETF issuers based in the United States, Europe, Asia Pacific, and Latin America, covering approximately $1.7 trillion in AUM:
- Client engagement has become more multi-dimensional, with a growing emphasis on digital interactions, but face-to-face engagement remains irreplaceable in building relationships with clients.
- The role of the ETF salesperson has evolved to become multi-faceted, reflecting the changing dynamics of the market and client preferences.
- Leveraging technology and data to optimize client engagement has become increasingly critical to success, as firms seek to enhance their digital distribution platforms.
- The usage of online retail trading platforms in Europe and Asia is expected to grow, but not all ETF managers will benefit from this trend.
- Having a best-in-class digital communication strategy is now non-negotiable, but it can never replace the value of a dedicated ETF sales team in building relationships with clients.
- Content remains king, but it must be differentiated, tailored to specific audiences, and delivered through multiple mediums to effectively engage clients.
- Wealth management firm engagement has become more challenging, with increased complexities in gaining availability and rising costs of doing business, particularly for newer entrants in the market.
A seismic change
“We have seen a seismic shift in the ETF distribution landscape since the COVID-19 pandemic,” says Michael O’Riordan, Founding Partner of Blackwater, and adds: “While digital engagement has become more prominent, face-to-face interactions and the role of skilled ETF salespeople remain crucial in building and maintaining client relationships. Firms that leverage technology, data, and differentiated content will be better positioned to thrive in this evolving landscape.”
According to the report, technology advancements skyrocketed during the pandemic particularly in the US where robust digital distribution strategies are now the norm for successful prospect targeting and client engagement.
Distribution organizations are embracing a hybrid virtual environment and the implementation of digitally focused engagement. “These factors have been in play in the US for some time but the pandemic forced the hand of firms to hasten adoption and improvements. Going forward, those who choose not to adapt to these advancements are likely to be left behind”, says Jillian DelSignore, Head of Strategic Growth and Solutions at FLX Networks.
Differences among regions
However, the report finds that other regions like Asia-Pacific, Latin America and Europe have not quite embraced a similar approach simply because of the differences in client type, fragmentation across different countries, and overall lack of 3rd party data providers servicing the ETF industry in these locations.
“Although markets like Europe may not yet have access to the level of data driven prospecting as seen in the US, we expect to see a significant increase in Retail adoption of ETFs over the next 5 years prompting further asset growth within the Europe region as well as increased distribution accessibility within online platforms, Robo advisers, and neobanks”, asserts Andrea Murray, Head of Business Development at Blackwater.