carte blanche – alfi 2021

Fund distribution: appealing to a generation reared on smartphones and choice

Georges Bock, CEO, Investre. (Photo: Guy Wolff/Maison Moderne)

Georges Bock, CEO, Investre. (Photo: Guy Wolff/Maison Moderne)

Remember when you used to go to a travel agent to plan your holiday? Today we get to choose, and many of us enjoy the process. We book our own flights, stay in strangers’ houses, and scroll through endless reviews to find that perfect restaurant.

Thank you, Internet. It turns out that we love distribution channels that put the decision-making power firmly in our hands.

Millennials are taking this one step further. Not just a generation of DIY travellers: the “you choose” formula applies to their finances too. Who needs an adviser or banker when a smartphone and brainpower will do?

Step in the online brokerages

The number of investors building their own portfolios online is exploding. The giant of digital brokers, Robinhood, has now amassed 13m users with 80bn in assets under management.

If the platform were the match, then Covid lit the flame. First-time traders in their 20s and 30s flocked to start investing as stocks fell to historic lows and opportunity blossomed.

Replicate success

In a world where experience beats products, and where good enough doesn’t exist, it’s time to start building distribution platforms that make investing in funds an empowering experience.

You don’t throw learner swimmers in the pool without giving them a float. Any new distribution channel worth its salt will have to bake education in, giving users the ability to glide smoothly from virtual trading and tutorials to their first real investments with small sums of money. But here, there’s a glitch.

Make it cheaper

Before Millennials can try out investing with small sums of money, something drastic needs to happen to the cost of distribution.

Today, the number of actors involved in the process keeps costs disproportionately high. Tomorrow, with DLT technology, the obstacles between the asset manager and consumer could be razed: if securities are tokenised. Investing can and will be incredibly cheap. Finally.

Help them make a difference

While we say that experience trumps product, there is, nonetheless, an incredibly powerful product to mention: ESG funds. Building platforms that help people answer the crucial question “Where will my money go?” is the next step for sustainable investments. Millennials want more rich and varied data to help them make decisions. Any new distribution channel should put this up front and centre.

Tapping into this era of choice could bring new, more engaged customers to investment funds. But this will mean more than a rethink. Opening new markets and lowering costs will mean ripping up the rulebook for fund distribution. Are you ready to help put the decision-making power in retail investors’ hands?