In-house versus third-party distribution in Australian funds management (wealth/adviser channels)
Funds management tends to treat distribution as a binary choice: build an internal team or appoint a third-party distributor.
Having now seen this question from several sides; working within an in-house distribution team, dealing with managers and their various distribution models from the ASX, and operating as an external extension of investment managers, I am increasingly convinced that the question itself is incomplete.
Let’s get one thing straight: I am not saying I have the definitive answer. But the strengths of the two models sit on opposite sides of the equation. In-house teams offer alignment, knowledge and proximity to the investment capability. External partners offer breadth, market perspective and the ability to add specialist capability without building everything internally.
Perhaps the model we have not yet solved is the one that brings those strengths together.
Where the in-house model works… and where it stops
In-house distribution should give a manager a tightly aligned team of BDMs working across client segments and channels, with deep knowledge of and direct access to its investment capabilities.
Having worked in-house, I know how powerful that alignment can be. The BDM lives and breathes the investment philosophy, knows the portfolio team and can represent the business with genuine depth and conviction. There is no ambiguity about which manager they represent or where their loyalty sits.
But anyone who has worked in funds management distribution also knows that an in-house BDM is only as effective as the artillery they have on hand.
The model works extremely well when a manager has a genuinely strong product in demand, or a range broad enough to remain relevant as markets and investor preferences change. But few strategies stay in the sun forever. Performance cycles turn. Asset classes move in and out of favour. And advisers hate it when a BDM tries to manufacture a problem they do not have simply to flog the product they happen to be carrying.
Unless the manager has a product range the size of Texas, an internal team can become highly dependent on relatively few strategies. If the market does not want what is on the shelf, there is only so much even a talented BDM can do.
The answer is not necessarily to replace that team. It may be to surround it with broader market intelligence, additional channels and specialist capabilities that do not make commercial sense to maintain permanently in-house.
Where the third-party model works… and where it stops
Third-party distribution appears to solve the problem of limited breadth. A distributor can assemble complementary capabilities, remain relevant through different markets and give offshore or specialist managers local access without requiring an entire local team.
Sitting outside the manager can also provide valuable perspective. An external partner can assess what the market actually needs, challenge the positioning and help build the content, visibility and infrastructure required before expecting flows. That perspective is useful precisely because it is not confined by one internal product agenda.
But distance can become the model’s weakness as easily as its strength.
The problem is most obvious when a distributor represents managers whose products are analogous. I have heard the concern directly from the gatekeeper of one of Australia’s largest private wealth APLs: a BDM arrives one week representing one manager and returns soon afterwards with another strategy that, without reading the fine print, appears almost identical. The natural question is “Which product does the distributor actually believe in?”
Product agnosticism can quickly begin to look like product indifference. The distributor risks appearing less like a trusted specialist and more like a travelling salesperson carrying whichever product is currently available.
Category exclusivity sounds like an obvious solution, but categories are rarely clean. Are two global equity funds competing if one is concentrated and the other diversified? Are two income strategies analogous if they serve different objectives?
The better test is whether the products compete for the same allocation, solve the same portfolio problem and are likely to be presented to the same buyer at the same time. If they do, the distributor needs a compelling reason for representing both.
The commercial model creates another tension. Pure “eat what you kill” remuneration incentivises asset raising, but not necessarily the slower work that makes it possible: positioning, education, content and sustained engagement. If performance turns or a strategy takes longer to gain traction, a distributor paid only on flows has a rational reason to direct attention elsewhere.
A large fixed retainer creates the opposite risk by weakening the link between effort and outcomes. The more durable model is likely to combine sustainable base economics with meaningful performance incentives—and to embed the external partner deeply enough that the relationship is about building the manager’s business, not simply carrying its product.
Distribution should shape the product, not just sell it
From the ASX, I saw managers use internal teams, outsourced arrangements and various combinations of the two. One lesson was consistent: launching or listing a product did not create demand for it.
Investment capability mattered, but so did the product’s structure, positioning, market relevance and the manager’s ability to sustain attention beyond launch. Too often, distribution was treated as the final step, something switched on after the product, vehicle and message had already been decided.
That gets the sequence backwards.
The people closest to advisers, investors, platforms and research houses are often best placed to identify unmet demand, structural gaps and why certain strategies gain traction while others do not. That intelligence should feed back into product development before decisions become fixed.
The strongest model creates a continuous loop between investment capability, investor demand, product creation, capital markets and distribution. It asks not only how an existing product should be sold, but whether it is the right product, in the right structure, through the right vehicle, for the right market.
That requires the proximity of an in-house team and the perspective of an external partner. Neither side is as effective operating in isolation.
The market itself is changing
This matters even more because the wealth market distribution was built to serve is changing.
For decades, fund distribution has revolved around intermediaries. Those relationships remain enormously important. But the next generation will inherit wealth with different expectations about accessing information, making decisions and interacting with financial products.
As digital tools, and increasingly AI, make investment research and portfolio construction more accessible, the route between manager and investor will become less linear. Advisers will remain important, particularly where circumstances are complex, but may no longer be the primary gateway for every investor.
Strong adviser relationships will therefore not be enough. Managers must also be discoverable, understandable and credible wherever investors make decisions. That requires content, brand, education, data and digital infrastructure alongside traditional relationship-led distribution.
Few managers will possess every capability required to do all of that well internally. Yet conventional third-party distribution may remain too narrow if it is principally designed to outsource sales calls.
Again, the answer may sit between the two.
The model between the models
An embedded strategic growth partner does not replace the in-house team or operate as another outsourced salesforce. It extends the manager’s capability where and when it is needed, while the manager retains control of its investment strategy, brand and key client relationships.
It can broaden distribution reach, build strategic relationships across the wealth ecosystem and add specialist capability across positioning, content, digital visibility, product development and capital markets. Importantly, it can connect those activities rather than treating each as a separate workstream.
The scarce resource in distribution is not the number of names in a CRM. It is attention. An embedded partner can add capacity without forcing the manager to duplicate infrastructure, while remaining close enough to the business to act with genuine conviction.
For a manager with an established team, that model provides leverage and fills capability gaps. For an offshore or specialist manager, it can provide a local extension without requiring a full Australian build-out. For a manager already using third-party distributors, it can provide the strategic coordination that ensures those providers are working towards one commercial objective.
This is not a compromise between two imperfect models. It is a different definition of what distribution is there to do.
We have not yet landed on the model
There is no universally correct structure. Some managers need an internal team. Others need the speed and access of a high-quality third-party distributor. Increasingly, many will need a combination of both, connected by a partner capable of seeing across product, distribution and growth.
The future may belong to the model that combines the alignment and investment depth of an in-house team with the external perspective, specialist capability and broader reach of a third party.
Done properly, that partnership does more than distribute products. It turns market intelligence into product opportunities, product capability into credible positioning, and positioning into sustainable flows.
The question is no longer simply whether distribution sits inside or outside the manager.
It is whether the manager has built the right ecosystem around its investment capability to create and sustain growth.