Asset managers and private banks – stung by a shortage of new assets flowing into traditional products and markets – are being spurred by the current economic and financial crisis into reorganising their priorities in terms of distribution channels, geographical targeting and product promotion.
Goldman Sachs Asset Management, which runs $780bn (E530bn), is a good example of a group shifting its resources in the distribution arena to make sure no time is being wasted by sales staff in targeting distributors which may not generate profitable business.
Under the stewardship of Nick Phillips, responsible for GSAM’s third party distribution business in Europe and the Middle East, there is a new concentration on establishing deeper relationships with smaller numbers of distribution partners. “In order to be successful, we are working on a few, very deep relationships, where they become partnerships, rather than a large amount of very narrow relationships, where we are just another house, which wants to sell products,” says Mr Phillips.
Rather than the not exactly scattergun, but wider net of old, Mr Phillips is directing minds, resources and sales efforts to target key outlets in Germany, Italy and the global distribution warehouses which operate in several countries.
Currently, GSAM has strong partnerships with Dresdner and Deka banks in Germany, and is expecting to add two more in the near future. GSAM runs $17bn (E12bn) for German clients, split fairly evenly between alternatives, fixed income, equity and quant strategies. But just $3bn is managed for wholesalers, with the lion’s share handled for German pension schemes, corporates and insurance companies.
Mr Phillips acknowledges there are no easy markets in today’s tough environment, but he will rise to the challenge by hiring another five staff to try and boost wholesale clients’ assets to the institutional level. One of the main problems in Germany, which GSAM’s Frankfurt office is facing, is that major retail and private banking groups such as Deutsche Bank, are critical of Goldman’s brand, or lack of it. GSAM is seen as an institutionally focused house, with little understanding of the customer-facing issue interesting the more retail focused German banks.
“We take the criticism of the wholesalers seriously and we are addressing it,” says Axel Hörger, head of Germany at GSAM. “We will never be a retail house like Fidelity, which is a different kettle of fish. The question we have to ask ourselves is: ‘what are wholesalers really looking for?’”
Reliability
The answer, according to Mr Hörger, is solid, reliable partners and products, backed by a defined investment process, which not only generates performance, but recognises the demand for reliability and risk management and encapsulates these qualities in the brand.
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The brand, and all it means, is particularly important to wholesalers in the current financial crisis, believes Mr Hörger, with groups able to prove they have maintained their process in difficult years likely to prosper. “Some providers cannot secure the backbone of what they have built. They might have had great products three years ago, but their process can become diluted,” he adds.
“There is a risk for retail clients that the company might suffer to a severe extent. This is different to just talking about performance and distribution support. We are talking about the whole foundation, the blueprint of a business structure, not just the front office, but the backbone, how you can leverage it and make it sustainable,” says Mr Hörger.
This distributor’s focus on brand, clearly intensified by the credit crisis, is one of the current pre-occupations for Mr Phillips, at the helm of the European sales machine. “This is not a Germany specific issue, but something that goes across all our third party distribution growth plans,” he says.
It is vital for groups such as GSAM, with big aspirations for brand enhancement, to take full account of their prospective clients’ business models when designing products, believes Mr Phillips. “One of these [different models] is to have a steady supply of very tangible products, so the private client adviser can talk to the client about something very topical – an infrastructure fund or a water fund. It is part of our plan to have these tangible products which people can understand.
“As we come to market with these products, the perception [among some retail banks] of us being very institutional will gradually change as we appeal more to their distribution,” says Mr Phillips.
Overseas diversification
The good news for GSAM is that the type of distributors they are targeting in Germany are also diversifying their business abroad. This means a strategic partnership in Germany is often replicated in other jurisdictions, giving asset manager partners access to more clients in more countries. Dresdner and Deutsche, for example, now sell products on a global basis. Even the privately owned, independent banks such as Sal. Oppenheim are increasingly looking abroad.
