‘No way back’ to closed system

Italian distributors are gradually opening up their fund range to third-party products, according to speakers addressing PWM’s annual afternoon European Fund Series event in Milan, which focused on the open architecture theme. Fideuram bank, which relies on the largest networks of promotori finanziari – or private bankers – in Italy, numbering 4,500 in total, has embraced the idea of an open platform “in a decisive way” only during the last two years, said Massimo Arrighi, chief executive officer at the Italian bank. “For an organisation like ours that has successfully grown by developing an offering strongly based on in-house products, opening up to third-party products is like changing chromosomes,” he admitted. But like many other authoritative speakers at the conference, Mr Arrighi acknowledged that open architecture is not just a fashionable theme, it is a structural change in the Italian industry, and “there is no way back.” “We are convinced that opening up our fund range is necessary to be able to give clients the best available product on the market and this way meet their requirements,” he said. “Our objective is to have in our range the right product not just to enlarge our array.” External products are included in multi-manager solutions or managed on a sub-advisory basis. Fideuram also sells directly off-the-shelf 1,100 funds from a dozen managers. However, third-party financial vehicles currently represent only 10 per cent of Fideuram banks’ ?65bn total assets under management. But a significant share of the bank’s total inflows this year went to multi-manager or third-party products to the disadvantage of in-house products. This shows that the decision to embrace open architecture is correct, said Mr Arrighi. Sanpaolo IMI, the financial heavyweight in the midst of a merger with Banca Intesa, has also recently decided to offer its private clients off-the-shelf third-party products, with the view to extend this offering to other client segments in the future. “It will be a guided approach at the beginning, we will offer a limited number of products from a small number of managers, and then we will see how it evolves,” said Giovanni Viani, head of retail and private banking at Sanpaolo IMI. But being able to offer third-party products needs experience, admits Mr Viani. “We are still learning and therefore we need to start from the private clients and work on small numbers.” Moreover, private bankers are generally more prepared and experienced and traditionally more capable of managing investments, he said. For a few years, the largest Italian bank has also been offering the multi-manager products of its subsidiary, Sanpaolo IMI Asset Management. “Those multi-manager products are the best products we have got,” said Mr Viani. “That shows that a domestic manufacturer is rarely able to do everything. Selecting instead of manufacturing can bring home much better results for clients,” he said. In November, Sanpaolo AM changed its name to Eurizon Capital, which symbolises its belonging to the new financial entity of Sanpaolo Group Eurizon, the company created earlier this year. Finanza & Futuro, which operates a network of promotori as the Italian distribution arm of Deutsche Bank, has a different perspective. Third-party funds were introduced in 2003, following Deutsche’s decision in Germany to establish global partnerships with nine fund houses. The different jurisdictions were given some flexibility on the product to offer and which managers to employ as well as the starting time of implementation. “We thought it was better to start immediately,” explained Daniele Forin, chief executive officer at Finanza & Futuro and head office advisory at Deutsche Bank. In Italy, the Deutsche Bank group has ?30bn under management. Currently, over 20 per cent of the products sold to clients are third-party products. Slightly bucking the Italian trend, which sees promotori networks more open than traditional banks, in Deutsche, third-party products enjoy a higher penetration in the bank branches, at 23 per cent, compared to 21 per cent in the promotori network. But selling third-party products off-the-shelf can imply having to give up some management fees. Mr Forin stated that they have been “rewarded” by their clients. “Our assets have increased, compensating the loss of rebates and management fees that we had before offering third-party funds.” Next year Deutsche Bank will offer products of an additional fund house but the intention is to “remain selective,” said Mr Forin.

Arrighi: opening up to third-party products was like changing DNA