Part II | Distribution Trends and Best Practices for Mutual Fund Firms

Part II of II. CLICK HERE | Read Part I

The asset management distribution landscape is undergoing rapid change. Share class definitions are shifting and use of “alternative” products is expanding. As a result, operational challenges abound.

During a recent NICSA webinar, panelists from BlackRock, BNY Mellon, and EY discussed the trends and best practices for addressing changes.

Three trends in particular, while not brand new, continue to affect fund complexes in many ways:

  1. Ongoing migration to omnibus accounts = added operational complexity and greater due diligence requirements.
  2. Growth of fee-based advisory model = increased interest in lowest cost classes.
  3. Growth of institutional share classes = increased demand for zero payment classes.

Here are suggested best practices from our panelists:

  • Rely on relationship managers to communicate through complexities and actively engage with intermediaries and platforms.
  • Continue to evaluate fees for reasonability and proper benchmarking.
  • Validate and reinforce suitability procedures and ensure eligibility is clear in prospectus language.
  • Ensure third-party providers are in compliance with regulatory requirements and in good standing with regulators.
  • Ensure that services provided and payments are commensurate with agreements.
  • Segregate duties, particularly with respect to TA payments, and ensure appropriate operations groups are involved in and leading contract negotiation.
  • Evaluate how many share classes to offer and how customized should they be.
  • Establish and closely monitor a process around any exceptions – should be minimal – and apply consistently.

CLICK HERE | Read Part I

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