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Competition and business have always been synonymous. If you can't do better than your competitors, eventually you're forced to close up shop. And when it comes to business, there are few more competitive than the brokerage industry. It seems nothing brings out carnivorous tendencies like the constant trading in money.
Competition has always been keen amongst the major mutual fund management companies operating in Canada --the majority selling their products through independent investment dealers, mutual fund agents, stockbrokers or financial planners. Some management companies, such as Investors Group Inc. (with about $6.4 billion under management making it the largest mutual fund management firm in Canada) sell products exclusively through their own sales network. Funds can also be purchased from insurance agents, trust companies and the large chartered banks.
The distribution of mutual funds, however, could change dramatically over the next few years. Actively acquiring equity in brokerage firms such as Wood Gundy, banks have also started retailing a complete range of mutual fund products for the novice investor and are the most recent players in the market. With vast distribution networks already in place, if successful, banks could become the dominant force in the mutual fund industry.
London sales representatives, however, believe the impact of the banks will, in the long term, benefit them. Tony Cuzzocrea, president of Planmar Financial Corp., says the presence of the banks, which have a positive public image, will add a lot of credibility to the industry and greatly expand the entire market area. Since about 10 per cent of Canadians own mutual funds, there is certainly room for the market to grow.
Cuzzocrea, and other London mutual fund sales representatives such as Tony Puzara, an accounts executive with The Investment Centre, or Paul Orrick, division manager for Verity Financial Limited, believe independents and mutual fund sales organizations will benefit because of the personalized service they offer. Puzara says, "Critical for the success of the banks in mutual funds will be how well they can provide this service on an ongoing basis and also fund performance."
But this is small solace for management companies which are facing growing pressure to increase their asset base by convincing dealers to sell their products....