Note: This article is courtesy of Iris.xyz

By Dan Sondhelm

While I was setting up office space for my new marketing firm, Sondhelm Partners, I had the opportunity to go through boxes of material from the many investment companies with whom I have worked over the past 20 years as a marketing strategist. This trip down memory lane made me stop and consider how technology, the popularity of defined contribution plans, increased competition from ETFs, and index funds and the decentralization of the intermediary market have transformed the way fund companies market and sell their products to investors and advisors.

I don’t think it’s a stretch to say that the industry has undergone more seismic changes since I joined it in 1995 than in the previous 50 years before it.

TAX INVESTING SHIFT

When I started, most people bought mutual funds as taxable investments, But as the decade progressed, IRAs and DC plans became the primary vehicles for mutual fund investing. In 1994, 22% of all DC assets were held in mutual funds; by 2014 that percentage had increased to 55%, according to data from the Investment Company Institute. With these plans effectively removing lower-net-worth investors from the direct-sold market, advisors have become the primary resource wealthier investors turn to for recommendations of individual mutual funds.

INTERNET’S RISE

The internet has enabled anyone to instantly execute investment decisions without the need of intermediaries. Of course, this empowerment also allows them to make costly mistakes, which has helped many advisors remain in business as “damage control” specialists.

COST IS KEY

Growing dissatisfaction with the lackluster performance of actively managed funds, the increasing popularity of index funds and the transition of many advisors from commission-based to fee-based compensation models have compelled many active fund managers to lower fund expenses and launch their own index fund options.

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