Size and Efficiency in the Mutual Fund industry

IBMs Many Eyes service recently published this visualisation of the world mutual fund market in 2010.

You can click on the image itself to see an enlargement, or here to see the original interactive visualisation.

The visualisation does a great job of showing just how much larger the US mutual fund market is than that of the UK and indeed even that of Europe combined.

I've argued before that size confers a distinct competitive advantage (see Innovation in Personal Financial Management: Culture or just numbers). The larger size of the US mutual fund market confers greater economies of scale, keeping prices down, and also provides a much greater prize to tempt innovators.

In order to remain competitive, Europe must provide a much more attractive regulatory environment (which comes with its own risks), or must normalise its national economic, monetary and regulatory systems in order to create a uniform environment in which its members can enjoy a combined scale similar to that enjoyed by their American competitors.

New stats on the financial services D2C market

The latest report from The Platforum again contains some interesting statistics:

• 40% of active investors take care of their investments on their own, while 26% consult an adviser and the remaining 34% rely on an adviser.
• Of the 40% who take care of their investments on their own 65% say they're interested and happy to spend time on it. Of the rest, 25% don't enjoy it and the remaining 9% find it confusing and complicated.
• Consumer awareness of platforms is up from 31% to 38%. Awareness of Hargreaves Lansdown, Fidelity Funds Network and Cofunds are up, but awareness of Skandia is down. Awareness of 'other' platforms is up by more, in both relative and absolute terms, than is awareness of any of the afore-named platforms.
• General financial websites, blogs and forums have at last overtaken independent financial advisers and brokers as active investors' chosen sources of information. Traditional media and providers' or distributors' websites lag well behind.
• The number of active investors who expect to buy from either a platform, bank or building society branch and/or financial adviser or broker are all up, but interestingly the number who expect to buy direct from an investment company is down.

As advisers and providers consider what will happen when the provisions of the RDR come into force, they would do well to factor these statistics into their plans to defend their existing customer base,or to grow their customer base and expand into new areas.

What is segmentation and how does it work?

Segmentation is not about putting customers into neat little boxes and hoping they will conform. Customer are individuals, and diverse. Their behaviours and preferences are circumstantial and may change for indiscernible reasons.

Segmentation is about designing and bringing multiple unique and differentiable propositions to market. ‘Customer segments’ are a tool to aid in this process.

Segmentation increases customer choice, thereby increasing customer value. Customers may choose one or more of the propositions, and their choice may change over time. Segmentation is the antidote to the ‘one size fits all’ syndrome.

Differential pricing is a method for increasing the amount of value you can extract from the market by charging more to those who are willing to pay more, and less to those who are not. However, differential pricing is only sustainable where other forms of segmentation are working effectively.

Dilbert on working from home

As a firm believer that working from home can improve white collar productivity, I particularly enjoyed today's Dilbert comic.