Tough investment conditions, falling consumer confidence, pressure on fees and charges… This year’s IFSA conference kicked off with a reminder of just how tough conditions have been for fund managers lately.
Credit Suisse Asset Management managing director Brian Thomas opened discussions by noting that 40 per cent of global asset managers had either reported a loss or broken even last year.
Colonial First State CEO John Pearce responded that fund managers would either have to undergo massive consolidation or reduce their cost base to survive.
Alliance Capital Management Australia CEO Michael Bargholz stressed that managers would also have to be clear about which part of the value chain they were gunning for. If they were targeting the retail market, they’d better invest in brand and innovative product. If they were going for the wholesale side, they’d better invest in performance. And they would need “industrial strength research” to put value back into their portfolios.
A theme that soon emerged was that fund managers were being tainted by the poor image of financial planners following research done by the Australian Consumers’ Association and Australian Securities and Investments Commission earlier this year.
Indeed, a recent IFSA poll of industry CEOs found that restoring consumer confidence was listed as either the industry’s first (by 66 per cent of respondents) or second (by 22 per cent) priority.
Other factors denting the industry’s image, according to Bargholz, were reports of negligent directors and self serving research. Together with other speakers, he stressed the need to restore trust in the industry.
On the topic of fees, Vanguard Investments Australia managing director Jeremy Duffield warned that the industry was no longer a “cozy club” and that there was now a range of fees out in the market.
“Competition is alive in the market. Now we need to get the consumer to see this,” he said. And, according to Pearce, the launch of low cost platforms, “baby wraps” and mini master funds would keep crunching fees down.
Invesco New York-based head of product development Russell Kamp noted that in the US, investment management fees were also falling, but, he said, pension plan sponsors were willing to pay if there was a relationship between results and returns.
