But, says Rothschild Asset Management’s global head of asset management, while it remains a work in progress with a great number of moving parts for the sector to consider, it will be “the next industrial revolution for asset managers” – the first was the recognition that alpha can be generated through stock selection.
Laurens told Portfolio Adviser that while phrases like ‘mass customisation’ and ‘outcomes-based’ have been spoken of for some time, the raft of changes seen on the regulatory front as a result of the implementation of legislation like MiFID II and RDR means that the sector is going to need to see new distribution systems settle somewhat before significant strides will be made.
In the UK he says, the inchoate shift to digital distribution and robo-advice is one of the responses to the introduction in 2013 of RDR. And, it is possible that the first properly mass-customised offerings will come through this channel. But, he added, such development will only happen if intermediaries feel that they don’t have to take responsibility for advice beyond the bounds of reasonable expectations.
“Right now,” he said, “you have conflicting trends towards, on the one hand, providing customised, outcome-based products or offerings to the clients, and at the same time, having a huge responsibility on advice, which is terrifying the intermediaries and the banks.”
The second challenge facing such development is how one remunerates distribution in such a scheme and, as yet, remains an unanswered one.