I’ve just spent two days two days at Graham Rich’s brilliant (an appalling pun there – sorry) Portfolio Construction Conference (PCC) and I don’t know whether to laugh or cry.
It’s not clear, after hearing the opinions of some of the industry’s leading thinkers, whether we’re facing the best buying opportunity in living memory, or the death of capitalism. To buy with one’s ears pinned back, or to slash one’s wrists – they seem the only rational responses.
What I do know is that whatever direction markets and economies eventually head in, not everyone is going to benefit equally. You learn most about a person’s character, and the character of an institution, not when times are great, but when times are toughest. This is one of those times, and each of the key parties in the financial planning and funds management industries is noting carefully how the other is behaving.
We are undoubtedly at one of those moments in time when reputations will either be be made or trashed. Decisions made today will have far-reaching consequences for clients, planners and fund managers. It’s clear that some parties’ reputations are being trashed before our very eyes.
A key message to emerge from the two-day PCC is that each group views the current outlook slightly differently.
Clients want what they’ve always wanted – that is, advice and guidance from someone who knows them well, is sympathetic to their needs and whose interests are aligned with their own.
Financial planners want fund managers to articulate a clear and unambiguous strategy, to reiterate in no uncertain terms how they see the future panning out and how their approach to managing money fits in with this big picture view.
But it has been noted that just when this message needs to be loudest, a large part of the industry has pulled down the shutters and run for the hills – to mix a metaphor there.
And fund managers want investors and planners to keep the faith and to stick to long-term investment plans, rather than chopping and changing and pushing money hither and yon like headless chickens.
The requirements of each party are, perhaps surprisingly, very well aligned – but each needs the other to do their part in order for the whole thing to work.
Clients need planners who will provide genuine leadership, and they need fund managers to demonstrate unambiguously that they’re in this for the long haul – to remind investors that the pain being felt now may be a transient thing, and that the funds management industry has faith in its ability to weather the storm.
Planners need clients to retain trust in them, to do as they’re advised (in blunt terms), and they need fund managers to hold the line and to support them in the task of providing advice.
Support can be provided in a number of ways – support for the Portfolio Construction Conference was one tangible measure – although a significant number of planners I spoke to have noted that the funds management industry seems to have disappeared almost entirely from other areas.
And planners have long memories. They remember that in previous downturns, some managers cut and ran – and those managers never, ever, regained the full trust of the planning community. Or investors, for that matter. Many of those managers are no longer with us.
It’s a bit rich, then, for all fund managers to expect to receive unqualified support and gratitude from planners and their clients. An act of trust on the part of planners and investors requires reciprocal action on the part of the fund managers.
And so while the PCC painted a picture of a future that could develop in one of two quite starkly different directions, one message I took form it was that it really doesn’t matter, in the sense that the funds management industry is innovative and adaptable. Whatever happens, the funds management industry will be able to produce products and services that planners and their clients value.
But if you’re running a fund management firm and you’ve pulled your head in and disappeared from public sight in recent months (and in the months ahead), you probably want to pray that when you deign to open your doors again that the crowd hasn’t moved on to the competitor up the road whose lights stayed on during the darkest hours.
