Continued equity market volatility will see a further reduction of fund managers operating in the local wealth management industry, according to Suncorp Tyndall managing director Brett Himbury.
"In more recent times we've clearly seen, as opposed to the 40 boutiques [fund managers] that established themselves in the 40 months prior to December 31, 2007, more and more companies announce either downgrades or collapses unfortunately," he said.
"We've moved into an environment where the absolute returns have fallen dramatically, divergence of returns have grown dramatically, and we've seen more and more people come out with either profit downgrades and substantial profit downgrades.
"If your profit is not much to start with it doesn't take too long before you get to a zero or a red bottom line."
In this atmosphere he predicted more boutiques would either shut down or be absorbed by the larger financial institutions.
The current fluctuations in the market would also see fund managers with the greatest skill prosper, Himbury said.
"It's been quite a long time since we've seen such a divergence in what investors have received in terms of returns from their investment managers," he said.
"This volatility really has shown up the importance of the skill of the investment manager in terms of what a client might expect to receive."
To support his argument Himbury quoted statistics from Intech that showed the average manager out of 71 had returned -5.9 per cent for the first quarter of 2008, with the best manager delivering a return of 5.6 per cent and the worst a return of -13.5 per cent.
"That says it's really important to understand the skill of the manager and their ability to deliver returns through all market conditions," Himbury said.
