Scandal free performance - the key to fund flows
Fund manager performance and investment style consistency have been identified as key factors in attracting fund flows, however manager reputation also has a strong influence on fund flows, according to new research conducted by Boston-based firm, Cerulli Associates.
The US-based firm said the recent scandals in the US had tainted many of the managers involved.
“Many advisers have stopped using an asset manager because of its involvement in recent mutual fund scandals… Advisers feel scandal-tainted managers have been forced to pay more attention to regulatory and compliance issues than alpha generation, and advisers do not want their clients to associate them with unethical asset managers,” Cerulli said.
However according to Cerulli, if the US experience is any guide, the most important factor in attracting investment remained performance.
“Performance still rules as the most critical factor for selection,” it said. “Even more so than an unblemished ethical reputation.”
It said that, additionally, fund managers needed to have a consistent style of investing “because most advisers consider this essential for constructing portfolios and maintaining an effective asset allocation strategy.”
The Cerulli data suggested that it is crucial for fund managers to stay at the top of the tree in terms of reputation and performance in circumstances where many advisers use as few as three managers to fulfil all their mutual fund needs.
“Asset managers must strive to become one of an adviser’s three most used asset managers, as if they fail to do so, the competition for the remaining paucity of an adviser’s assets is fierce,” the research said.
Recommended for you
Financial Services Minister, Stephen Jones, has assured the cost and time to enter the financial advice profession will soon be halved, as shadow treasurer Angus Taylor pledges to reach 30,000 advisers.
The positive results of the latest financial adviser exam have helped the advice profession reach 15,600 yet again, according to Wealth Data analysis.
Financial advice firms have told Adviser Ratings they are planning to increase their compliance spend by almost a third, including on enhancements to their cyber security which ASIC has identified as an enforcement priority.
The digital advice platform is officially launching into the financial advice sector, offering up its services to practices as a means of engaging with the next generation of clients.
