It’s all retail money!

One of the strongest themes in asset management of recent years has been the industry’s effort to connect with the end-investor… or rather re-connect. Firms had that connection once. Now many have lost it.

For years the industry has allowed itself to be disintermediated from the individual, the person who actually invests in their funds.

In the UK retail market, assets managers became reliant mainly on IFAs to sell their funds. In Europe, banks played the same role. Asset manager brands slid from public view and no-one even knew what a fund manager was anymore.

Private banks commanded the conversation in the high-net-wealth market, leaving asset managers further out of the picture.

But it is in the pension fund market where there is a truly yawning gap between the asset management firm and the end-investor.

At a conference recently, the Lens heard a panellist put it very succinctly. “Institutional asset managers say they don’t have to bother communicating with the scheme member. They say, ‘Well, it’s the pension scheme that is our client’.”

The panellist added: “But that’s crazy. All money is retail money!”

It is increasingly recognised that losing that connection with the public – or “outsourcing the relationship” – was a mistake.

First of all, in not understanding what a fund manager is, the public lumps them together with the detested, mis-selling, crisis-causing banks.

Secondly, and more importantly, society at large needs the (by one estimate) €7 trillion in retail money sitting in bank accounts and money market funds in Europe to be invested in equities and corporate debt – both for the sake of people’s pension pots, and for the sake of the UK/EU economy.

To do this, fund managers have to explain to investors that sitting in cash for ten years is actually more of a risk than investing in stock markets. That is a deep and possibly long conversation that needs to be had and fund managers shouldn’t leave it to intermediaries.