Aiviq has commenced 2024 with a series of European market-focused roundtable events, this time hosted at Sofitel Kirchberg in Luxembourg. On January 30th, we collaborated with Alpha FMC's Luxembourg Practice, represented by Head of Compliance Marc Marly, to delve into the discussion on Data Driven Distributor Oversight & Regulatory Compliance with industry leaders from Franklin Templeton, AllianceBernstein Invesco EMEA , Capital Group, Schroders, Jupiter Asset Management, HSBC , and Columbia Threadneedle Investments EMEA APAC.
The roundtable discussion primarily centred on understanding how the CSSF’s expectations concerning distributor governance and oversight are evolving and what this means for European Fund Management Companies.
CSSF Circular on Governance:
Marc Marly opened by outlining the latest challenges he is hearing in response to the 18/698 Circular and how Managers are struggling to establish a holistic view across global distributors.
Rafal Kwasny, Conducting Officer at Franklin Templeton (FTI), then provided practical insights into their journey of consolidating global distribution arrangements and strengthening governance and oversight. Addressing challenges and opportunities stemming from significant growth and strategic initiatives, such as the Legg Mason acquisition in 2020, Rafal noted this initiative has been pivotal in enabling FTI to scale distributor onboarding and oversight processes going forward. Engaging questions from participants spanned topics ranging from the challenges with distributor sales MI data in EMEA (an Aiviq ‘hot topic’) to the challenges integrating technologies and data from across the client lifecycle – encompassing KYC/onboarding, CRM, pricing and contract negotiation through to rebates, reporting and service obligations.
We were privileged to have Laurent Denayer, Chief Executive Officer at ume - #1 fund distribution due diligence platform, join us in the room to reflect on the evolution of distributor due diligence over the past 7 years since the inception of CSSF Circular and similar global regulatory initiatives. Distilling the way the market has matured elegantly, Laurent illustrated the emerging Pareto curve dynamic, where most distributor oversight and due-diligence risks can be addressed with a surprisingly small number of questions across all managers – highlighting that there is a science and an art in asking the right questions to maximise meaningful responses that can feed risk models.
As Aiviq heard in the room, Managers are adopting interesting and divergent approaches to interpreting distributor questionnaire responses and the natural challenges remain around how to risk-weight responses and strike the optimal balance between commercial objectives and regulatory expectations.
Why is managing commercial terms with distributors so challenging?
Wrapping up the session, Luke Tones, Aiviq’s Head of Product, gave an interactive product walkthrough, showing how Aiviq is helping managers with distributor oversight and governance by creating a golden source for mastering distribution agreements, fee and rebate terms and service obligations - all linked to live AUM & sales data.
The discussion then flowed naturally into how a holistic view of distributors could be achieved and why this still proves elusive across the industry - i.e. connecting distributor commercials, risk metrics, reporting/servicing actions and sales insights across all the functional and regional teams and business processes associated with delivering the full client experience.
We extend our gratitude to all speakers and participants who joined us, contributing their insights and experiences to the discussion. Your engagement played a crucial role in fostering dialogue around the future of ‘Data Driven Distribution Oversight and Regulatory Compliance’ in Luxembourg and we look forward to continuing the discussion in our upcoming roundtable events.
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