Banks Face New Profit Hit as Money Managers Seek to Bypass Them

(Bloomberg) -- Banks and insurers, beware: your role as middlemen in the sale of investment products may be under threat.

Forty-four percent of fund managers plan to sell more products directly to retail clients over the next five years, according to a State Street Corp. survey of 250 firms in 15 countries.

The new MiFID II rules may help them to do it. The regulations increase the burden on providers to ensure customers are being sold appropriate products. This means that vast amounts of data on retail clients are being collected -- information that, State Street says, could be used by money managers to bypass advisers and consultants.

“MiFID II is the regulation that’s going to probably disrupt the distribution game,” David Suetens, the country head of State Street in Luxembourg, told reporters in London on Wednesday. “You see stars -- regulation and technology -- that are getting more aligned to potentially disrupt a business model that has been running for many years.”

It’s difficult, however, for asset managers to get to know their customers as well as companies in other industries, said Suetens. In the survey, 43 percent of respondents reckon the European Union’s revised Markets in Financial Instruments Directive will make it harder for them to distribute products.

Consumer-product companies “know exactly why this bottle of shampoo is selling better on the third self in Italy in supermarkets rather than the second shelf in Germany,” said Suetens. “The asset-management industry, at this moment, has very little insight” into its own retail clients.

©2018 Bloomberg L.P.

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