Renewing the promise : Time to mend relationships in investment management
Description
The credit crisis has proved to be a catalyst for tumultuous market, corporate and individual events (for example the failure of Lehman Brothers, the rescue of AIG, and the exposure of several high profile frauds) which continue to resonate within the financial services industry. These events have touched all sectors of the industry, and have helped to fundamentally reshape several of them; including investment management.
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| Publié par | kpmg |
| Publié le | 06 juin 2011 |
| Nombre de lectures | 329 |
| Langue | English |
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kpmg.com
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. The views and opinions expressed herein are those of the survey respondents and interviewees. These views and opinions, along with the associated commentary from KPMG Investment Management professionals, do not necessarily represent the views and opinions of KPMG International or KPMG member firms.
© 2009 KPMG International. KPMG International is a Swiss cooperative. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. KPMG and the KPMG logo are registered trademarks of KPMG International, a Swiss cooperative Printed in United Kingdom Designed and produced by KPMG LLP (UK)’s Design Services Publication name: Renewing the promise: Time to mend relationships in investment management Publication number: RRD-140423 Publication date: June 2009 Printed on recycled material.
Renewing the promise:
Time to mend relationships in investment management
June 2009
F I N A N C I A L S E R V I C E S
Acknowledgements
KPMG International commissioned KPMG editorial board and Datamonitor to produce the report commentary contributors: which, focuses on the topics of corporate governance and risk management, Chaired by Tom Brown KPMG in the UK ected future trreugsutl ainti ionnt earnmd etdhiea risetrsa, teexgipc importance of Darina Barrett KPMG in Ireland differentiation for investment managers. Anthony Cowell KPMG in Cayman Islands This paper seeks to closely examine the Vincent Heymans KPMG in Luxembourg opinions of representatives of retail and Gerold Hornschu KPMG in Germany institutional investors and the opinions of Mikael A Johnson KPMG in the US investment managers on these vital topics. As a result a number of gaps and contrasting John Li KPMG in Luxembourg views were highlighted, which we think can Bonn Liu KPMG in Hong Kong help guide the industry in these key areas o PMG in the UK that will be vital for recovery. Patrick McC y K Jacinta Munro KPMG in Australia Our foremost thanks go to the 288 respondents from 29 different countries Richard Pettifer KPMG in the UK who answered the initial survey Tony Rocker KPMG in the UK questionnaire and the 22 executives who Wm. David Seymour KPMG in the US gave their time for interviews. James Suglia KPMG in the US We would also like to thank members of the editorial board and our project team who have helped us carrying out this research, as well as the Datamonitor analyst team. Wm. David Seymour Global Head of Investment Management KPMG in the US
Tom Brown EMA Head of Investment Management KPMG in the UK
James Suglia Global Head of Investment Management Advisory KPMG in the US
KPMG project team: Leah Dering-Ridley KPMG in the UK Monica Eyers KPMG in the UK Freddie Hospedales KPMG in the UK Cara Scarpino KPMG in the US Mireille Voysest KPMG in the UK Nicolas Xanthopoulos KPMG in Luxembourg Datamonitor analyst team: Michele Gorman Annabel Gorringe Stuart Rutherford
Survey respondents by group: 35 % Wealth managers 25 % Investment managers 17 % Pension funds 11 % Insurance companies 10 % Family offices 02 % Sovereign wealth funds
Renewing the promise
Contents
Page 4 About research
5 Definitions
6 Executive summary
10 Chapter one: Improving corporate governance and risk management: Addressing the perception gap 16 Chapter two: Trust issues: Intermediaries need help to win back unhappy investors 22 Chapter three: The industry should prepare for a cascade of regulatory changes 28 Chapter four: Differentiate or die: There is no place for unremarkable investment managers in today’s market 34 Challenges ahead: The keys to success 36 Contacts
About the research
Renewing the promise: Time to mend relationships in investment management was produced by KPMG with research and support from Datamonitor. This report draws on the findings of a global survey of 288 respondents representing the investment management industry and investors as well as in-depth interviews with senior executives working across the industry.
• The survey was conducted during • The respondents came from 29 • To further explore the key issues February and March 2009, and countries and four regions – Western emerging from the survey process, was designed to obtain the views Europe (30 percent), Asia Pacific (30 Datamonitor also conducted in-depth of a wide range of investors and percent), North America (30 percent) interviews during March and April stakeholders in the global investment and the Middle East (10 percent) – 2009 with 22 executives from some management industry. Out of the and typically held senior management of the most prominent investment 288 respondents, 101 came from positions in their companies. The managers and wealth managers in wealth managers, 71 from investment respondents’ answers were then Western Europe, Asia Pacific and managers, 48 from pension funds, weighted according to the relative North America. 32 from insurance companies, 29 size of their organizations’ assets from family offices and seven under management. In total pension • Please note, illustrated graphs do from sovereign wealth funds. funds participating in the survey not all add up to 100 percent due to The respondents not only provided managed US$227billion in assets, the rounding or because respondents their own views on issues, but, insurance companies US$181billion, were able to select multiple answers where relevant, the views of the wealth managers US$146billion, to some questions. retail or institutional investors that sovereign wealth funds US$127billion, they serviced. and family offices US$14billion.
Survey respondents by country Australia Austria Bahrain Belgium Canada China Denmark Finland France Germany
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Hong Kong India Ireland Italy Japan Jordan Luxembourg Netherlands Norway Oman
Qatar Singapore Spain Sweden Switzerland Taiwan UAE United Kingdom United States
Definitions
eRenw
The following definitions explain how the terms below have been used throughout this report:
ing the proimse
• Respondents – The 288 individuals • Institutional investors – The • Investment managers – Traditional who participated in this year’s survey institutional clients serviced by the fund managers and alternative fund included representatives from wealth investment managers. In this survey managers who participated in managers, family offices, investment the views of institutional investors this survey. managers, insurance companies, were captured via questions asked of pension funds and sovereign pension funds, insurance companies Additional group referenced wealth funds. and sovereign wealth funds. • Financial intermediaries – Those client facing advisors - not investment Respondent groups • Investors – Collective term for retail managers - who provide advice and • Retail investors – The retail clients investors and institutional investors. recommend product solutions for serviced by the investment managers. retail and institutional investors. In this survey the views of retail investors are captured via tailored questions asked of wealth managers and family offices.
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Renewing the promise
Executive summary
The credit crisis has proved to be a catalyst for tumultuous market, corporate and individual events (for example the failure of Lehman Brothers, the rescue of AIG, and the exposure of several high profile frauds) which continue to resonate within the financial services industry. These events have touched all sectors of the industry, and have helped to fundamentally reshape several of them; including investment management. Today, investment managers find themselves operating in a new world; investor trust has been further damaged, former market leaders have been diminished or eliminated, and regulation is poised to impose significant changes on the industry. However the investment management industry also deserves its share of culpability; it has been accused of sometimes not delivering on promises made, and of letting down both intermediaries and investors.
65 % of investment managers globally cited a lack of vision by top management as the major obstacle to change, leaping up to 90% of managers in the US.
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This report seeks to provide In order to help address these trust investment managers with insights issues, investment managers should from investors into the current and consider improving training on their anticipated future nature of this new products for intermediaries and world, and provides ideas on how providing concrete evidence of the to navigate through it. Crucially, better risk management practices it argues that one of the keys to they have implemented. Investment recovery for companies and the managers should focus attention industry, lies in large-scale change on communication, and respond to and in mending relationships through investor calls for more face-to-face improving communication and contact. transparency within the industry. The results of the survey • Tahbeoruet tahree iwmidpaesctp roefa pd oconciealrns indicate that: tent new regulations. Politicians and the • Investment managers and investors industry have differing ideas about have divergent views on how much what areas should be prioritized progress the industry has made in for new regulation. The survey improving risk management and identifies that investment managers corporate governance procedures. expect new regulation in the Investment managers should ensure areas of limitations on leverage, that they are making progress level of disclosure to clients, – notably by embracing industry additional external assurance and best practice codes of conduct and risk management and internal ensuring more independent oversight controls. Respondents anticipate of their business – and that they are that regulations will have profound conveying these improvements to implications on the investment stakeholders effectively. management industry and managers need to engage with and respond • The reputation of financial to regulators, while re-shaping their intermediaries, the investor-facing businesses for the likely landscape advisors, has been hit hard.The survey that will emerge. shows that intermediaries are now seen as less trustworthy than politicians.
• Differentiation is critical. Investment 77 % tqomwhuneahi icndmckaehl tg ya loemia rndansgi ydf fb sweeeuilfrtiegfiehcng viiteenei asvntttteh eltsey hit so–ba t rte aotsp hrtrc eeoow sbinulanlecydte mfunosstrt r rayt e of investors overall felt that is suffering from a lack of strategic intermediaries were less trustworthy vision. By contrast, pension funds than politicians. and insurance companies suggest that the key to differentiation is client relationship management. Analysis suggests that the winners in today’s environment will combine big company strengths (such as low fees) as personal relationships). 81 % and small company strengths (such of respondents think that regulators clamping down on the industry will remove opportunities for innovation going forward.
KPMG comment In the last 12 months the investment management industry has witnessed a steep decline in markets, massive government intervention and major frauds - events that have helped to change the shape and size of the industry and caused uncertainty amongst investors, intermediaries, regulators and investment managers. Investor trust, already at a low, continues to deteriorate and restoring it is vital for managers and intermediaries to rebuild investor relationships. Our study this year has focused on the investors’ perspectives of the industry; something, it is clear, many investment managers have not been doing. This is surprising, as, at its core, investment management is a client centric business. However, investors often deal directly with intermediaries meaning that information flows between investment managers and investors can become convoluted. Investment managers should seek to work more closely with intermediaries to reach clients.
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Renewing the promise
“ The investment management industry has changed very fast in the last few years and the speed of this change has perhaps left many investors and even intermediaries and regulators behind. Now is the time to go back-to-basics.”
KPMG
KPMG comment Key messages to the industry from the study: Investor perspectives matter Investment managers – back-to-basics Regulatory reform Investors have different perspectives Investment managers should put Investment managers recognize that from investment managers about the clients at the heart of everything that further regulation is both inevitable industry, including: they do. This means that they should: and necessary. However, there is disconnection between the regulation • How much they feel the industry • Focus on quality service and client that both investment managers and has progressed in the areas of relationship management to help investors think should be implemented risk management and corporate them differentiate from competitors in and the regulation they think will be governance? the market implemented. In addition, investment Their answer: not enough C ni te clearly with investors managers are concerned that further • ommu ca regulation will increase costs and • How much they still trust through as many channels as possible stifle innovation. There is a clear risk intermediaries? and ensure fund managers are visible that new regulation may damage Their answer: not much and available to talk to clients the industry rather than achieve the • Investors are demanding • Achieve improvement in the areas positive return to trust hoped for. Investment managers must should cmoomrem turanincsaptiaoren nwciyt ha inndv besetttmere ntomf acnoargpeormateen tg oavnedr cnoanmcem uannidc aritsek engage now on the regulatory agenda, managers and financial progress to clients in response to in order to position themselves to deal with what is expected to be a massive intermediaries. investor calls for greater visibility wave of regulation. Financial intermediaries need support • Investment managers should also The complexity of investment work with financial intermediaries to management products and services help restore investor trust means that financial intermediaries are vital to the industry.•Bfiyn awncoirakli inngt ewrimthe dai asrimeasl,l eirn vneusmtmbeer of nt Unfortunately, trust in them has been mlaantiaognesrhsi pcsa,n wbhuiilcdh clwoilsl ehr elp improve badly damaged and needs to be rebuilt. re Financial intermediaries may achieve information flows to the investor. this by obtaining better training and support on products from investment managers.
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58 % of institutional investors think
investment managers should provide
financial intermediaries with better
product training to address the trust
issues that intermediaries have.
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Renewing the promise
Chapter one: Improving corporate governance and risk management: Addressing the perception gap
For those who are in any doubt There is, however, a wide range of views Of course, the decision on whether or about the importance of the need to about what needs to be done in the not to release reports may not lie with improve corporate governance and broad areas of corporate governance the investment managers but with their risk management, this year’s study and risk management. Some of the respective regulators. In many countries, reveals two key findings: this is an ideas that were voiced in the in-depth the regulator is limited by legislation as area where new regulation is likely; interviews included a greater focus on to what it can and cannot disclose with and, more importantly, addressing quantitative analysis (over fundamental regard to individual firms. this is vital to rebuilding investor trust. research), board representation for Indeed, 46 percent of investors think the head of risk and the separation of Investors’ wish list: that if investment managers make the investment product manufacture from Actions that respondents believe necessary changes in terms of risk product distribution. investment managers should be management and corporate governance prioritizing to achieve improvements in procedures, their trust will be restored in To give the debate some shape, the areas of corporate governance and the short term. respondents were asked to highlight risk management: the corporate governance and risk Of course, it is one thing to improve management actions which investment • Visibility on reports issued by regulator corporate governance and risk managers should be prioritizing. including the specific findings management procedures and Twhoeu lndu limkbe eirs ogrneea atecrti ovins itbhiliatty i novne rsetporosr ts • Adherence to industry best practi quite another to convince external issued by a regulator – in other words, d s of condu ce stakeholders that improvements have co e ct been made. Investment managers are ind en urance trying to regain investor trust and satisfy tinhvee fistnidgiantigosn osr i notuot pau pt afrrtoicmu lraer gcuolamtporayn y. • Obtain more ep dent ass regulators. They need to make sure that In the current environment, the specific • Use of external independent directors. they both make appropriate changes findings from regulatory investigations and then communicate these changes have assumed huge significance, effectively. This survey indicates that and investors – particularly insurance Beyond this, investors are also looking the industry needs to address both of companies, where the response rate for investment managers to adhere these areas – the actual gaps and the reached 84 percent – want access to industry best practice codes of perceived gaps. to these. conduct and for there to be more
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