Financial intermediaries, including banks, advisers, insurers, portfolio managers and brokers, dominate fund distribution, representing 80% of European retail investors’ assets, according to the European Fund and Asset Management Association (Efama).
According to Efama’s market insights report, this report provided an analysis of how investment funds are distributed to retail investors across 19 European countries, covering assets totalling €4.4 trillion. Additionally, financial intermediaries providing advice to clients emerged as the predominant distribution channel, holding sway over 80% of fund assets owned by European retail investors.
Among these intermediaries, banks took the centre stage, commanding a considerable market share of 45% in Europe and 57% in the European Union. However, the UK stood out with a 70% share compared to 27% in the EU, showcasing the nuanced differences in distribution dynamics across regions.
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Financial advisers followed closely, securing the second position with a 14% market share in Europe and 18% in the EU, with prevalence in Italy and the UK. Insurers trailed behind with a 7% share in Europe and 9% in the EU, demonstrating stronger footholds in certain countries like Norway, France, and Slovenia.
The Efama analysis mirrors the German fund market, which is the largest in the EU, as per the European Central Bank.
In Germany, savings banks, cooperative banks, and private banks collectively represent 59% of the total retail fund business. This encompasses banks with branches as well as direct banks/online brokers, significantly influencing the distribution of ETF shares.
Foreign managers often find that funds of funds provided by established players in Germany offer a convenient and effective gateway into the market. Although companies with their own distribution channels or established partnerships typically don’t utilise them, some foreign providers still capture over 10% market share through this avenue.
According to BVI, the German funds association, unlike in many other European countries, institutional investors, such as pension funds or foundations, only account for a small part of retail fund assets in Germany- their share is just about 11%. “Institutional clients in Germany typically invest either directly or through Spezialfonds or discretionary mandates,” said the BVI.
Open architecture fund platforms, offering access to a diverse range of funds, currently hold a modest market share in Europe and the EU, but exhibited a presence in Norway and Sweden.
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Additionally, pension-saving channels, accounting for 7% of the European market, showed remarkable prominence in Denmark, Sweden, and France.
Survey participants anticipate a surge in the market share of open architecture fund platforms and financial advisers over the next five years, with financial technology expected to be a key driver in reshaping the fund distribution landscape. This anticipated shift underscores the evolving preferences and strategies within the European investment landscape, signalling potential opportunities and challenges for fund managers and investors alike.
Bernard Delbecque, senior director at Efama, commented: “The report underscores the pivotal role of fund distribution channels capable of offering guidance, support, and advisory services to retail investors. Ensuring accessibility to these channels without imposing upfront fees is crucial for fostering increased household participation in capital markets.
Furthermore, the anticipated rise in competition between digital and traditional fund distribution channels is good news, as it will incentivise advice-based distribution channels to evolve, further enhancing user experience and delivering added value.”
