Today’s markets are experiencing unprecedented swings, and the investment management industry has also become far tougher than ever before: revenues have plummeted, costs have remained sticky, and the playing field has been leveraged. The global economic crisis ripped through the financial sector, one of the first casualties was client trust.
Investors began to question whether the sector was acting in their clients’ best interest or their own. At the same time, the majority of investment managers have underperformed market index, meaning many individual and institutional investors are paying fees for disappointing performance.
Capital requirements are now increasing, the profits are becoming more volatile and both investment risk and reputation risk are rising. Attempts to cut operating costs failed to achieve the necessary savings and the result has been a significant deterioration in the industry fundamentals. As a result, these companies are questioning the strategic fit of their non-core business activities within their portfolio; and some are logically divesting them.
Indeed, there is a clear consensus that alignment of interests between the company and client will be at the center of the winning business model.
But the industry desperately needs to rebuild trust and confidence, which means giving customers what they really want: unbiased advice, transparency, accountability and service excellence.