It's time for asset managers to take transparency seriously

When it comes to client trust, one bad apple can spoil the whole barrel.  Andy Agathangelou Founding Chair of the Transparency Task Force and FundForum Asia speaker, takes a look at why it's time for the asset management industry to take transparency seriously.

"Transparency has the power to heal a festering sore on the face of financial services; the festering sore of deliberate opacity, obfuscation and opportunism"

Appallingly low savings levels

It has just been announced that the UK is enduring its lowest savings ratio since 1963; an appallingly low level of just 3.8%, which will be a major concern for those tasked with crafting monetary policy within HM Government, for the Bank of England, for the pensions industry and of course for asset managers too.

A lack of trust is a fundamental factor

There are many complex and inter-connected reasons why the savings ratio is so low, but I am sure as I can be that a significant part of the problem is that the savings, pensions and investment industries have allowed their reputations to become tarnished which in turn leads to distrust.

This is borne out by extensive research on the topic – see, for example, the Edelman Trust Barometer. Such research reveals a harsh reality that will be a significant concern for delegates at FundForum; all of whom want to increase in-flows and therefore all of whom have an interest in fixing what is a problem for the industry as a whole, right round the world.

What’s the solution?

There's no easy answer I’m afraid, but let’s get straight to some home truths: every time there is a scam or a scandal it hurts the industry as a whole, not just the guilty; and every time an asset manager is shown to be withholding information on costs or obfuscating around performance figures it hurts the industry as a whole, not just the firms involved.

We have a collective interest in stamping out any market behavior that reflects badly on the industry as a whole, but it won’t be easy. Part of the problem is that trustworthiness is an outcome not an input; you cannot control how trusted you are, but you can control factors that are conducive to greater trustworthiness; and it’s on that basis that we need to recognise the very special qualities that transparency has because it is a lever we can all pull on. Transparency has the power to heal a festering sore on the face of financial services; the festering sore of deliberate opacity, obfuscation and opportunism. The industry should exploit information asymmetries no more.

It is easy to see the correlation between transparency, truthfulness and trustworthiness: Greater transparency does lead to greater truthfulness; which in turn, over time, will lead to greater trustworthiness. It must make sense therefore for all parts of the asset management value chain to support all efforts to drive up transparency; our reputations quite literally depend on it.

Why you should get involved with the Transparency Task Force?

The Transparency Task Force is a collaborative, campaigning community dedicated to driving up the levels of transparency in financial services, right around the world. We believe that higher levels of transparency are a pre-requisite for fairer, safer and more efficient markets that deliver better value for money and better outcomes to the consumer.

Furthermore, because of the correlation between transparency, truthfulness and trustworthiness, we expect our work will help to repair the self-inflicted reputational damage the Financial Services sector has suffered for decades.

The Transparency Task Force seeks to operate in a collaborative, collegiate and consensus-building way; focusing on solutions not blame, and there’s no cost to join.

“Sunlight is the best disinfectant”

That beautifully simple phrase sums up what the Transparency Task Force is all about. We believe that financial services market behaviour is improved when it is visible; and conversely, that behaviour happening ‘in the shadows’ tends to be at the expense of the consumer.

Those of us who care about the sector and the people it serves can, and should, work together to help put things right. Let’s stand up, not stand by; and let’s take heart from the famous quote by Margaret Mead:

“Never doubt that a small group of thoughtful, committed citizens can change the world; indeed, it's the only thing that ever has”.

Andy Agathangelou will be talking more about transparency in asset management and the Transparency Task Force at the upcoming FundForum Asia, taking place in Hong Kong 24-26 April 2017. Find out more about Asia's leading asset management event here.