Before dealing with problems such as falling revenues fund managers must rebuild trust among financial advisers and clients, according to a new study.
“Fund managers that are part of large financial institutions have seen their reputations damaged by huge losses in other business lines,” a Boston Consulting Group (BCG) report said.
“Additionally, some products that had been marketed as relative safe investments proved to be anything but risk free.
“High losses quickly undermined both adviser and client trust, leading to greater attrition in both groups.”
Advisers need frequent and honest communication from fund managers’ leadership, explaining how this crisis is being dealt with.
Many advisers have seen a significant reduction in the value of their long-term compensation, so fund managers may need to develop new and creative incentive programs to enhance adviser retention.
Intense economic pressures have made cost reduction imperative for fund managers, but they have also given them the impetus to make tough decisions that are easy to avoid during better times.
“Small clients should be priced up or migrated to lower-cost service models or simply encouraged to leave,” the BCG study said.
“Low-performing advisers and product specialists should be rationalised to bring capacity in line with new client and asset levels, and compensation schemes may need to be restructured.”
Fund managers must have well-prepared, detailed and honest performance discussions with clients to rebuild their credibility.
Global wealth assets under management dropped to $151.7 trillion in 2008, down from a record $170.5 trillion in the previous year, according to BCG and Economist Intelligence Unit.
