The US structured products distributor moves to expand the reach of its distribution channel.

Axio Financial, a US distributor of structured investments with 2018 notional sales of US$3.2 billion and 63 employees, has purchased the entire wholesale business of Navian Capital, the parent company behind Luma Financial Technologies, the multi-issuer electronic platform for structured products and annuities which launched in 2018.

“The acquisition does not include Navian’s Luma platform as it is a different business,” Axio Financial chief, Marc Paley (pictured), told SRP. “We have no intention of competing with Luma, Halo or Simon but we recognise these platforms provide a front-end technology once you have a financial advisor interested. The key question here is how you get to those 321,000 US financial advisors.”

Axio is seeking to capitalise on the move as it is “a significant undertaking and something the market was missing”.

“Everybody appreciates the fact that technology can bring efficiencies and transparency, and improve connectivity but increasing awareness is something platforms cannot do by themselves,” says Paley. “Our goal is to build relationships with advisers, we are platform agnostic and will work with any platform a network prefers. What we bring to the table is the ability to cover financial advisors in an efficient way. We see platforms as a complement to what we do.”

The acquisition of Navian Capital wholesales operations gives Axio another distribution channel to bolster its coverage of independent, bank broker-dealer and registered investment advisers (RIA) sales channels.

“We currently operate in the independent broker dealer and RIAs channels,” says Paley, adding that Navian’s business has enabled Axio to increase its footprint in the bank-broker-dealer channel while expanding coverage of independents where we were already the largest provider. “The Navian wholesale business is highly complementary to our existing distribution footprint.”

Axio has two main competitors in this space including Incapital and FirstTrust but with the Navian acquisition the firm will have access to “a broader client base”.

“There has been significant fee compression across all aspects of financial services, and structured investments are not immune to that,” said Paley. “That is one of the by-products of increased transparency and improved technology in any marketplace. In order to be viable in this operating environment, let alone successful, it is imperative to be as efficient as possible at every stage of the product creation/distribution process. Naturally, this applies to issuers and distributors alike.”

Paley believes that what is happening in the structured products market is not new to the wider market as we have seen this kind scenario unfold already in the asset management sector.

“The parallels are numerous,” says Paley. Lower management fees dictate lower distribution fees, otherwise it would not be viable. All of this has to be accomplished without sacrificing the quality of service. The market is in a period of transition currently and has yet to establish a new equilibrium. We have seen the beginning stages of technological advancement/disruption, what we have yet to see is how that will influence growth. Eventually we expect material growth to follow, but as with all technology adoption it will be a long process.”

Axio will continue to focus on structured notes and market-linked CDs, but it’s open to fixed indexed annuities as they “have many similarities with MLCD’S and they have very similar client bases, which is a client base we know very well”.

Axio is a distributor of structured investments with notional sales of US$3.2 billion in 2018, and 63 employees.

Photo: Leigh University