Should Asset Managers Pay for Shelf Space?

Last week a wealth management firm announced it would stop selling Vanguard mutual funds, though clients of the firm can still add money to existing Vanguard investments through 1Q18 and purchase Vanguard ETFs. Like many in the investment industry, my first thought was that this firm did this because Vanguard does not pay for the distribution of its funds (aka “shelf space”). 

This week that same firm told InvetmentNews that they decided to stop selling Vanguard mutual funds because they are trying to treat all asset managers the same.  In this case, the argument is that all other asset managers are paying for shelf space, so to eliminate a conflict of interest it makes sense for them to stop selling the funds that do not pay for shelf space.  Personally, I think there would be less of a conflict of interest if asset managers did away with the tradition of paying for shelf space.  

For those wealth management firms looking to pair down the products that they offer clients, there are solutions available to help them prune out the bad funds – those that may be stale or that charge unnecessarily high loads. I discuss these solutions in my latest report Regulation as an Impetus or Change: Technology Solutions for Fiduciary Responsibility.

Kelley Byrnes About Kelley Byrnes

Kelley Byrnes is an analyst with Celent's Wealth Management practice and is based in the firm’s New York office.

Kelley has worked on strategic planning for advisor facing technology and on fixed income trading desks. Kelley also has experience is sales and partnerships, driving channel strategy, regulation and technical projects for financial institutions.

Prior to joining Celent, Kelley was a director at Barclay Investments. She also held positions at Bank of America Merrill Lynch, as an assistant vice president in the wealth management practice and as an analyst on the fixed income institutional sales desk.

Kelley received her MBA from the McCombs School of Business at the University of Texas – Austin and her BA from Washington University in St. Louis.

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