Improved communication, industry-player cooperation seen to heal new wounds. Asset managers have to start doing a better job of communicating if they hope to start winning back the trust of recession-battered clients and prospects. A back-to-basics approach to managing client relationships -- rooted in dynamic outreach, education and knowledge sharing, and backed by more stringent self-governance and transparency -- is the key to mending the damage done by two years of market volatility and a series of scandals that has spared few financial-service segments, according to a new Datamonitor report commissioned by KPMG International.

"At this time of market turbulence and broken trust, the investment-management industry should adapt and change to re-engage investors," says KPMG partner Dave Seymour. "Open communication among market participants is particularly critical, and investment managers and intermediaries should forge collaborative, knowledge-based partnerships, focused on the client."

Adds Seymour, who runs the investment-management practice of KPMG's U.S. arm: "By implementing a joined-up approach [between managers and intermediaries], supported by better corporate governance and risk management, the needs of the investor could be better met."

Better effect

London-based market-research firm Datamonitor surveyed 288 senior executives at asset- and wealth-management firms, family offices and institutions in 29 countries this past February and March, and conducted lengthier interviews with executives "from some of the most prominent investment managers and wealth managers in Western Europe, North America and Asia Pacific," according to KPMG.

In general terms, the study suggests that improved communication is vital to success in the investment-management industry now and in a post-recession world. Crucially, communication should flow from managers to intermediaries and to regulators as well as from investment managers to their clients -- as intermediaries and regulators "will play a fundamental role in repairing the trust that has been broken," says KPMG.

Investment-product consumers point to a number of ways asset managers can communicate to better effect. Investors and intermediaries call for additional information and transparency from managers on investment products and strategies, and for explicit acknowledgement by managers of their adherence to codes of conduct best practices, and for more "face time" with managers.

As it happens, industry studies suggest that intermediaries are actually more distrusted by investors than the managers few investors ever directly work with. Here though, a clear majority of managers feel they can improve matters by helping investment advisors better understand their products and approaches.

Managers' resolution to help industry participants more trustworthy to investors runs into several obstacles, however. First, asset managers suspect that brass at their own firms is resistant to change. Worldwide, 65% of them feel their own top managers lack the vision to make the kind of positive changes in communication favored by the rank and file. The picture is even darker in the U.S., where 90% of managers see their bosses as obstructionist.

Second, managers see an expected surge of regulatory change sapping the strength, will, time and money of most firms, leaving little room for self-directed change. Datamonitor found that 81% of respondents expect that increased regulation "will remove opportunities for innovation," 72% think that more regulation "will seriously increase costs for investment managers," and 63% suppose that managers will be have to absorb these higher costs of doing business rather than pass them on to investors.

Despite these challenges, the investment space is on the brink of breakthrough that could lead to better relations between industry participants and the investing public, according to Seymour's colleague James Suglia.

"More than ever, the 'time is now' for true engagement between the industry and the regulators to shape the future of the investment-management landscape," says Suglia. -FWR

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