Fund managers face world-wide scrutiny

By Rebecca Evans

Fund managers must move aggressively to provide clients with objective counsel in light of biased advice claims due to the dominant role of distribution groups, according to Deloitte Touche Tohmatsu.

In a report — Asset Management Industry Outlook — the professional services firm says the industry could see new advice models gain market share and identifies 10 issues facing the global funds management industry. It also highlights the trend towards increasing scrutiny of business practices within the sector.

“Firms that can maintain investor trust by upgrading their management practices could secure an important competitive advantage as the industry comes under more critical scrutiny,” the report says.

Deloitte found an increased level of investor participation has induced fund managers to meet with companies more often in an effort to influence board and management decisions. Deloitte says the impact of new regulatory requirements has necessitated substantial changes to business processes.

Linked to increasing investor demands, the report uncovers the escalation of compliance and ethical standards as key competitive challenges in funds management.

“Asset management firms have recently begun to take a more public role in working to improve governance and performance of companies they invest in. In considering whether to become more active shareholders, firms face difficult issues about how best to serve their clients,” the report says.

Increased expectations from institutional investors, alternatives to managed funds attracting investors and globalisation issues are also key drivers in the sector.