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ICBI Research: Seven key challenges for asset managers if they are to restore credibility in the eyes of the consumer

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New research conducted by ICBI – the organiser of the annual Fund Forum International conference, now in its 20th year – focuses on key challenges fund managers must face if they are to restore credibility in the eyes of European consumers.

Based on objective research with over 100 leading asset manager players and top distributors from across Europe, ICBI says the results “reflect the future surrounding European asset management”, and highlights the following seven challenges for business heads:

1) Finding new ways of addressing the core issue of investor credibility and trust. How can top management show leadership in working together to change an industry culture? What can financial services do to regain investor trust and whose problem is it? Whose adviser are you? The client’s or the bank’s? If not clearly the client’s adviser why should they have any faith in investing? So what is the purpose of asset management? Whose problem is it: the EU’s, government’s or individual asset managers?

2) Responding to what investors will be prepared to invest in the future and why. What kind of product and with what assurances? How is the core battle between passive beta products and alpha driven active management panning out and which brands or businesses does the customer trust most to buy from in the different countries of Europe? Insurers, high street mobile operators, internet providers, alpha boutiques, private banks or corner savings banks? Where do the asset managers sit?

3) Collaborating to create an effective European retirement product that delivers to the customer what it promises. Can the industry really just sit back and concentrate on private wealth? How can asset managers, insurers and capital markets players collaborate to innovate? What different skills could each partner bring to the table? What is the role of capital in dealing with uncertainty? Is it even viable to think that there are products to provide income in old age and what are the compromises that may need to be communicated? What could be the viable partnership business model and what about the thorny issue of retirement provision for the millions of Europe’s financially excluded?

4) Leaders working towards influencing a regulatory framework that supports both customer needs and industry’s ability to deliver i.e. creating scale and compulsion. This means working more closely with regulators, pension funds and customer advocates to redefine the European financial ecosystem enabling a viable business model to be created with fiduciary responsibility. What might A New European Style 401k Lifecycle Product look like? How would this influence the shape of European banking and distribution?

5) The crucial top management issue of how to become and then stay relevant to the buyer of the future – whether you are an asset manager distributing to intermediaries or the distributor to the end consumer. How can the asset managers learn from emergent innovators in other sectors, using other delivery mechanisms like Web 2.0 to get genuinely (and crucially, not just superficially or cynically) close to the customer? How do you generate customer advocacy in a large existing business? What are the most effective portfolio planning solutions and what are the implications for distributor relationships and fiduciary responsibilities? How can you plan your own sustainable route for the new customer-centric intermediary & distributor business of tomorrow?

6) The urgent redrawing of the distributor/manufacturer relationship for a new era of the UK’s RDR and the inevitable Continental European contagion. Leaders and business heads need to take a deep breath and innovatively find solutions for rethinking compensation, looking at new product and geographical partnership potential among guided architecture, addressing fee transparency and effecting genuine collaboration. How can we make a distinction between the price of the product and the cost of advice at the retail, private banking or institutional level?

7) Transforming the asset management industry into an effective, efficiently run business. The credit crisis highlighted huge inefficiencies in the average asset management business with high fixed costs and limited largely unknown metrics of profitability or performance, sometimes deliberately obscured. The over arching dominance of the distributors over the manufacturers has led to backward and ineffective use of technology compared to other industry sectors. Now the compensation and remuneration models are changing the imperative – and the urgency – is clear. What is the future role of service providers in providing new valuable management information about the cost of performance? How are new distribution and partnership platforms impacting business efficiency for different products? What can the industry learn from the more tightly run alternative sector?

Conclusion: From villain to hero? Taking steps towards a credible, useful, vibrant, asset management industry: The survey concludes: “Politicians know that the EU is in real danger of slipping back to a period of life unknown for generations. Widespread old age poverty, where retirement provision can no longer be sufficiently provided by the state nor viable through private asset management, where the people simply turn their back on investment; returning to gold if lucky or cash under the mattress. Shame on regulators and shame on asset managers if this dereliction of duty is allowed to happen.

“However the asset management industry could turn itself around to become the hero and not the villain of the piece. To those in the vanguard of change bold enough to develop a new range of products and services under a new business model, there are great new opportunities in store.

“With open minds, innovative leadership and committed collaboration and a largish dose of humility, the industry can start to be re-energised to create a useful, credible, pre and post retirement solution for all investor sectors. With asset management’s credibility restored – so would be its rationale and its future.”

The New Fund Forum International 2010 takes place between 28 June and 1 July 2010 at the Grimaldi Forum, Monaco.

For further details contact Jenny Adams: jadams@icbi.co.uk Or visit www.icbi-fundforum.com

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