Barron's has good news for all you mutual fund distribution executives desperate to sell in the high net worth channel. Karen Hube details the HNW channel shift away from proprietary investments and towards open architecture investment lineups.

"Many banks are loath to admit that somebody can manage investments better than them -- it's a cultural thing," Paul Ahern of Winslow Capital Group told Barron's. "But now they realize their proprietary disciplines are not sufficient to be competitive."

"We've become completely financial-advisor-centric and client-focused," Bill Carroll, head of investment solutions at UBS, told the pub.

In the annual ranking made by Barron's 40 largest wealth-management firms, virtually all of those belonging to the top 40 use open-architecture platforms. This includes a number of top shops that now have no affiliated asset management products at all: US Bank, Barclays, GenSpring, and Merrill Lynch Global Wealth Management.

Here are some examples, gleaned from our survey, as to how much the Wall Street heavyweights are relying on outside managers to broaden their platform: Rockefeller farms out more than 50% of its clients' equity portfolios to outside mutual funds; JPMorgan, 64%; BB&T, 80%.

The Barron's article details the history of and reasons for the shift, pointing to pioneers like Northern Trust, U.S. Trust and Wells Fargo. And open architecture alone isn't enough. The pub sees HNW shops now compete as advisors and gatekeepers who help clients choose asset allocations and managers.

"It's gotten to the point where open architecture isn't differentiating anymore," said Jamie McLaughlin, founder and CEO of consulting shop J.H. McLaughlin & Co..

"We don't have a supermarket approach," Megan Taylor, chief operating officer of private-wealth management at Goldman Sachs, told Barron's. "We want the selection broad and deep so we can address all of our clients' needs, but not so much that we're sacrificing our diligence standards." 

Edited by: HFD


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