Rebuilding trust the primary priority
Australian fund managers need to take positive action and regain investors’ trust to turn around the massive outflows the industry is suffering, according to The Boston Consulting Group.
“The first priority of fund managers should be to rebuild client trust,” Boston financial services industry leader Matthew Rogozinski said. “This is even more important than containing costs or finding new ways to achieve growth.”
The call comes as data pertaining to the Australian funds management industry has revealed it suffered dramatic outflows during the September quarter. According to Morningstar, the industry suffered outflows from funds of almost $7 billion, bringing the total funds under management to $715.8 billion. This is down from the total Australian funds under management in December 2007 of $850.9 billion.
Rogozinski said these figures do not reflect the even greater falls in world markets during October.
“These figures are even before the financial crisis reached a crescendo in October, which could have pushed outflows significantly higher,” he said.
Based on Boston’s 2008 Global Asset Management report, fund managers need to take positive steps to regain client’s trust.
“These steps include addressing client needs through better distribution practices — which will help not only rebuild client trust, but also increase market share — and enhance risk management,” the report said.
Reducing the number of products and segments the fund manager operates in should now be initiated, the report suggested, and the level of services should be better focused to the target audience.
Boston accepts service to high-net wealth clients should be maintained, as this segment demands it.
Supporting distribution outlets, such as platforms and advisers, with the right sales tools that address client needs is another action that should be undertaken by managers.
This includes training to ensure the advisers are delivering the right information to clients.
“Ultimately, the message for retail asset managers is to communicate more pro-actively with distributors and not avoid talking about painful topics, the report said.
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