VettaFi CMO Jon Fee discussed key trends in distribution to kick off the Industry Conclave at Exchange. Fee led the audience through some icebreakers and then began digging into the disruption driving durable growth.” I fundamentally believe data is greater than opinion,” he said.
Fee on the cost of success
He shared a sentiment that the cost of entering the ETF market is low but that it is high to succeed. This is due to disruption. “Usually, people don’t like disruption because of its commonality with change.” Distribution has had disruption in multiple vectors, technology has been a big driver. Tech like ChatGPT and artificial intelligence is changing the landscape on various fronts.
How disruption happens
Disruption happens when power is consolidated. Fee noted that Uber broke the taxi and medallion model. Disruption also occurs when an outdated technology is updated. According to Fee, it can also occur when business practices aren’t changing despite negative sentiment. Importantly, it also happens when the data says so.
“Think about the ETF when it came along. At the end of the day, the ETF is a technology and what did it disrupt?” Fee noted that the mutual fund had consolidated power, was an outdated technology, and the business was ripe for change.
VettaFi CMO Jon Fee on distribution
The “What” and “How” of disruption
Fee believes that distribution has always been about the act of sharing, making for a consistent “what” over time. The “how” is changing, however. Ultimately, much of the disruption has been pointed toward empowering the end investor. “The gap is so wide for financial literacy, but it closes a little bit every year.”
With 4,000+ U.S.-listed ETFs, these funds have created a lot of competition. People are always looking online for any product, including ETFs. This means that issuers and asset managers need to change with the times. Fee said that thinking about people is key. He asserted that issuers could find more success if they hire sellers who think like marketers, hire marketers who sound like sellers, and put AI in their org chart. “You have to start thinking that way.”
Fee on distribution strategy
Looking at how issuers approach distribution, Fee urged them to consider a pivot to client-centric functions. “Put on your values, client-first, whatever it is.” Getting out of asset class structures and leaning on cross-trained people who deploy data-backed tactics. “Those that are winning now, they are allocating to data -backed tactics.” Fee also urged that it is essential to align your business with partners who share success metrics. “Push for outcome-based pricing. [It’s] super common in the tech industry.” Having partners who are invested in your success and who are dedicated to your success can be a difference-maker.
Executing strategically, these days, is very much about service. The speed at which an issuer can bring a product to market and out-service the competition is crucial. “The issuers who are treating speed as IP – they’re winning. They’re also leading from the outside in.”
