The 50 per cent of Australian funds that disclose holdings on a regular basis stand to gain from the growing priority investors place on transparency and open business practices, according to the chief executive of Morningstar Australia.
Heather Brilliant, whose background is in equity analysis in the USA, believes such practices should be a hygiene factor and not a differentiator and will serve as a means of helping to restore clients’ trust in the financial services industry.
Brilliant, who became chief executive of Morningstar Australia in 2014 and was formerly the firm’s Chicago based global head of equity and credit research, has been shocked by the lack of transparency offered by Australian fund managers since arriving in Sydney.
“Only 50 per cent voluntarily disclose their holdings on a regular basis, whereas virtually everywhere else it is mandatory,” she said. “A few Australian fund managers believe their edge comes from keeping this secret, but with adequate time lags on disclosure that is empirically not true.”
Brilliant is a member of the CFA Institute board of governors and in that capacity will be speaking on the subject of trust in financial services at the CFA Societies of Australia Investment Conference, the Sofitel, Sydney on October 13.
In her presentation she will disclose the results of a global survey of institutional and retail investors that will reveal their thoughts on the fund management industry.
The previous survey conducted in 2013 found most investors thought the number one factor for helping build trust in a fund manager was transparent and open business practices. Taking responsible actions to address an issue or a crisis, and ethical business practices were ranked second and third by investors.
Brilliant believes transparency is linked in investors’ minds with a manager that is more likely to be acting solely on their behalf.
“The only way as an industry we will regain trust is if we put the needs of the end investors at a higher level than our own personal gain,” she said. “You need to provide the transparency and comfort that not only is the [fund manager representative] incentivised to act in the best interest of their clients or the public, but they actually go beyond that to create a level of trust.”
She added current government programs or initiatives being debated both in Australia and other countries were probably insufficient on their own to restore trust in the financial services industry.