There is a lot of talk in global markets about how we rebuild this trust. However, I can’t help feel that a lot of this discussion is self-serving. It usually ends up in the recommendation that we need to better educate investors so that they understand what we do, or worse, it focuses on a small handful of cases of fraud and negligence and looks at ways to improve ethics and regulations.
While both of these things are critically important, they conveniently ignore the fact that the bulk of investment returns we have delivered over the past decade have simply not met the needs of our client base. This is not about poor financial literacy or even fraud, but perhaps goes back to the quality of our product, conflicts in the system and our own beliefs about what is realistic. I recognise that not meeting return expectations is largely about beta, not alpha, but of course consumers don’t differentiate. They are looking to our industry to improve their quality of life now and in retirement. We have led them to believe that we are able to do this.
I feel this is one of the biggest issues we face as an industry. To regain trust we need to be able to earn it.
Richard Brandweiner is chair of the CFA Society of Sydney and head of income and multi-sector strategies at Perpetual Investments.