Market Ready for a return to fundamentals

By Brian Bissaker

These are tough times — that much is certain. Particularlyfor our customers, this is the harshest financial market environment most have ever seen and are ever likely to see.

These are the times that will shape the coming years and decades for our industry. The extent of the changes cannot be underestimated.

Already this year we have seen a number of the most well-known names in financial services disappear and a number of others acquired by competitors. And there is likely to be more upheaval.

But as every financial adviser worth their salt has drilled into their clients over the past year, these tough times will come to an end.

The upside risk of missing the inevitable recovery and falling interest rates will bring investors off the sidelines and back into the market.

As an industry, I believe we now need to heed our own advice and lay the framework for our future prosperity.

The path to that prosperity starts with rebuilding the trust of our clients. Over the past year, their trust has been tested by negative returns and other consequences such as fund closures. So they are now looking for a different type of relationship with their financial adviser and fund manager. We will need to earn their trust again.

Here are five things I believe will play an increasingly important role over the coming years to regain that trust.

1. Back to basics

Many investors believe the smart people with the structured products and opaque fee structures are at the heart of our current malaise. We need to show our clients that successful investing need not be over-complicated. And we need to ensure the strategies and investments we are putting before our clients are appropriate for the new environment and that we understand all the risks associated with them.

2. People before numbers

In times of stress, relationships with real people become even more important. Those companies and individuals who hold the hands of their clients through the next year or so will build loyalty for life. Now more than ever, our clients need advice. Over-communicating about long-term goals and the right investments to reach those goals will be critical.

3. Financial strength over nimbleness

Security and strength may never become buzzwords but clients will want to know that the people they entrust their money with will be there for them for the life of their investments. The strength of our own personal and corporate brands will become even more important.

4. Experience over innovation

In times of hardship, people look for guidance and shun anything new. Tried and trusted investment strategies will come to the fore. Expect more questions on that Aussie equities fund that has been around for decades and has consistently outperformed and less questions on the new fixed interest arbitrage strategy.

5. Straight talking on fees

Nothing sharpens the focus on fees like poor returns. Our clients will demand to know exactly what they are paying for and how much they are paying. And if our clients don’t, the regulators certainly will. We will need to work even harder to demonstrate the value we provide and strive to get our clients the best deal.

None of these are groundbreaking. Some have been hidden from view in our industry for the past decade. Now is the time when the old becomes new again.

Brian Bissaker is the chief executive officer of Colonial First State.