Money management firms must work harder to improve the value of their offerings to asset owners, delegates at an industry conference were told this month.
The money management industry needs to better align its offerings with the needs of asset owner clients, speakers from a range of institutions said at the Pensions and Lifetime Savings Association's investment conference, held March 7-9 in Edinburgh.
The presentation of fees is one area for improvement, with a call for more "comprehensible" offerings coming from Anne Richards, CEO of M&G Investments, speaking March 8. Ms. Richards added that the challenge for the industry is to create overarching standards for the reporting of fees, particularly given the Financial Conduct Authority's scrutiny in its review last year. "We need to figure out how to get better in order to find ways of absorbing these costs" related to regulation and trading.
The right fee structure should satisfy multiple, different regulatory requirements, she added. "Customers more often choose simplicity over a good economic proposition."
The need for improved fee disclosure and transparency was championed by industry experts at the PLSA conference because investors not only face a series of new investment risks, such as climate change, but also will face additional difficulties when assessing the more familiar macroeconomic risks. Economists speaking on a separate panel on March 8, said economic indicators used to measure risk and predict market movements have changed. Central bankers now drive interest rates changes, instead of free market forces, said speakers.
David Miles, former member of the monetary policy committee at the Bank of England, said: "GDP in many developed markets, including the U.K., is less capital intensive than it used to be. (Also), GDP is not heavy stuff anymore. It's almost weightless and in 30 years it will be as heavy as it is today."
Megan Greene, chief economist at John Hancock Financial Services, said during the same panel, "Labor, because it is so cheap globally, is being (considered) the new capital."
Climate change risks
Conversations about addressing climate change investment risks and building a more sustainable financial system will dominate the agenda for asset owners in the next years, according to conference speakers. But industry experts warned the incorporation of environmental, social and governance risk mitigating elements in investment strategies needs to be adequate. And according to plan executives, there are not enough relevant strategies available to address these risks.
Despite ESG becoming an integral part of investment strategies, plan executives criticized the money management industry for a shortage of key data availability, such as adequate indexes that track gender diversity.
Jennifer Anderson, investment manager at the £9 billion ($12.4 billion) TPT Retirement Solutions, London, said on a separate panel discussion that the multiemployer plan will be working on incorporating ESG into its default fund. "It's not straightforward how to (implement) it across multiple asset classes," Ms. Anderson said. "A plan executive needs to know which ESG risk is material."
Speaking in a keynote address March 7, Nick Clegg, former deputy prime minister of the U.K., called on the money management industry to find a way to bridge the divide between generations. He said this gap had been dramatically amplified following the global financial crisis by the response of financial and monetary authorities. Members of the PLSA and the industry as a whole should" sensibly, wisely and profitably invest the money to provide the benefits to the society," he said.