Kurtosys spoke recently to Mark Savage, head of distribution – UK & Ireland at Kames Capital. We discuss the decline of the industry’s glamour but its rise in professionalism, frustrations with outdated marketing collateral and how strong heritage in fixed income, multi-asset and sustainability strategies puts them in good shape for the future.
What is the most noticeable characteristic of being an insurer-owned asset manager?
It is our heritage despite being under a different brand and I see a difference with insurer-owned asset managers. I can’t speak for everyone but there is a tendency towards lower-risk management, certainly from a sales perspective. Even though we have had lots of changes in our fixed income franchise, I don’t think I can ever see fixed income not being in the DNA of Kames.
We’ve also got multi-asset, which traditionally would have been running the Aegon managed funds and is now one of our most popular strategies; the Diversified Monthly Income fund, which feels like a ‘proper’ multi-asset strategy we might have run for an insurance partner in the past.
Elsewhere our income focus is key, because historically we have run LDI strategies and so if you have an insurance partner and you engage with them, as we do, then you can come up with a solutions-based mindset from a slightly different perspective than just wholesale fund distribution.
What have been some of the biggest changes that you’ve seen in terms of the distribution market since starting out 20 years ago?
There are definitely fewer people doing fund distribution. The large broker desks used to be a real hunting ground for new talent but you don’t see that anymore; many groups are closing them down.
But then as the number of key decision-makers we deal with is smaller – through consolidation, natural attrition and centralisation of buying – it means there are not as many of us getting out and about, whether that’s a breakfast meeting or a life company roadshow. It’s harder to get clients along to third party events.
I also think the industry has become slightly more professional. I don’t want to suggest it wasn’t before as we’ve always dealt with high-end advisory and discretionary firms, but around expectations over qualifications and the ongoing professionalisation of the industry, which I think has definitely happened and will continue to do so.
Having said that, it’s also become slightly less glamourous – and probably rightly so – but that can make it more challenging for the younger generation to get those relationships. Everyone from a UK firm to an overseas player will want to come and see a UK-based wealth manager with £25bn under management and a centralised dealing process, so they become hugely busy, and even the opportunity to have a text chat, a WhatsApp exchange, or ideally get in front of them becomes so important and it may be difficult without an existing relationship in place.
So some of us of a certain ‘vintage’ were fortunate enough to forge some of our relationships – and that extends to the fund managers themselves – in exotic locations on conferences and such, which while I understand that hasn’t looked good for the industry and may have admittedly gone too far – from a relationship perspective, I think that falling away will make it more challenging for the younger folk.
How do you use tech, in the various aspects of your business?
I see technology more as an enabler than a threat. Looking at my iPhone I can pull up all my notes, my CRM – I can link to the Salesforce app on my phone, pull up a dashboard of my team’s activity, track client behaviour on our website or send a follow-up email because they’ve expressed some interest in a particular fund.
Even taking screenshots of expense receipts just makes our lives easier as they can get input and signed off in a more efficient timeframe.
I think technology probably makes the interpersonal side of it even more important because it’s the one thing technology can’t do. When you are dealing with wealth managers, with people talking about big transaction, big money, big flows, business risk and so on, people want to talk to people. So I see the future as bionic rather than robo. If you have good contacts, can add value, be creative, the personal side is even more important.
What do you see as some of the major changes to come over the next 3-5 years?
I think platform pricing is going to come down and can see a future where you don’t pay anything for the platform. I think as technology develops it will just be overall part of the solution, in the same way that certain pieces of software are already embedded in Windows, which I think is fine but various models will need to reflect that.
It will ultimately lead to more consolidation across the value chain, from asset managers to distributors to platforms. I think the smaller boutique players will become more in demand if the larger scale players look outdated, and we keep hearing about blockchain and how that is going to change things.
How is Kames targeting the next generation of investors?
One area we have a lead on that is hugely topical and relevant to millennials is ESG and ethical investing. Audrey Ryan’s Ethical Equity fund celebrated its 30-year track record this year. We can genuinely demonstrate that heritage and that we do take it seriously. We do make an impact; we have done some research with wealth managers and have been rated the best-rated fund management brand in the UK on that side of things. We also have our Global Sustainable Equity fund, which screens on a positive rather than negative basis.
But it’s not just millennials, we are hearing interest from all clients and I think it will become more so. I think one area we will see asset growth will be on the DC side. When we speak to Aegon and various institutional consultants, ESG and sustainable factors are really picking up in default ones. Nest, master trusts and things are all really small pots, but DC will be the biggest growth area in the next 10 years, so those small pots will grow dramatically and ESG will be a big part of that.
As there is more and more appetite for these types of funds and more jump on the bandwagon, there are plenty of allegations around the industry of greenwashing, and I would agree with some of it. I do not think you would ever get that with us – you have to live and breathe it – and there are so many resources available for people to expose if something was going wrong and then your brand is tarnished.
We produce a fair amount of content on this to demonstrate our expertise, including our quarterly newsletter, Engage and our weekly blog, Sustainability Soapbox, which has been a slightly different way of engaging with a new audience.
What piece of kit needs a complete overhaul?
We still have to do factsheets and find it pretty laborious and traditionally they sit on your website, they come out closer to the end of the month than the beginning, we have to do them from a regulatory perspective and nobody ever asks for them anymore. You can get stuff from any digital provider quicker. We deal with some pretty high-end wealth managers in the UK and they need quarterly or monthly full portfolio holdings to be ready by business day three. And a factsheet is taking a couple of weeks. But that’s been my bugbear for a long time.
It’s also funny when you go to some presentations on sustainable strategies and they give out stacks of paper presentations in a plastic bag. There may be IT issues and I appreciate sometimes it’s not avoidable but we have just done them recently on our sustainable strategies and it’s all on iPad, so that also, when I swipe it swipes for them, so they can’t flick to the end and switch off. The industry is slowly waking up to that but it still makes me laugh.
What’s the one question clients never ask that you wish they would?
Everyone always asks the fund manager if they invest in their own fund. No one ever asks the sales guy, of all their funds on offer, which would you buy? It might be a bit embarrassing but I always thought if I was on the other side of the desk, I’d ask that as the fund manager pitted against others is a standard question, but asking the sales guy would give you an insight – even if from one perspective – into the wider product franchise.