Practical analysis for investment professionals
07 November 2017

Collaborate with Clients to Create Investment Solutions

On 18–19 September, CFA Institute will host Women in Investment Management: Opening Doors, an event to create better outcomes for investors and provide greater opportunities in finance to women around the world.


The important role asset managers play in the financial ecosystem is something Elizabeth Corley thinks about every day in her work with clients, boards, and governments.

“Asset managers are seen as absolutely central to the free movement of capital — investing in new innovation, opportunities, and job creation,” the vice chair of Allianz Global Investors told the audience at the 2017 CFA Institute Alpha and Gender Diversity Conference.

Yet in parts of Europe and around the world, Corley sees people questioning whether capitalism is working for the good and for all. Years of quantitative easing (QE) and ultra-low interest rates have put enormous stress on people making only a living wage while boosting those who are already rich in assets.

Corley urged asset managers to think more about where they sit in the financial ecosystem, the consequences of their actions or inactions, and their heightened responsibilities to clients and society.


Asset Management – Playing an Important Role in the Financial Ecosystem

Asset Management – Playing an Important Role in the Financial Ecosystem

Source: CFA Institute, “Future State of the Investment Profession,” April 2017


What Clients and Regulators Expect

A 2017 Greenwich Associates survey of institutional investors ranked “behaving ethically” first when it comes to what clients expect from their investment managers, Corley observed. “Avoiding scandals,” “being responsible,” and “behaving as global citizens in the management of capital” were also among the top five answers.

Clients are demanding more accountability and transparency.

Regulators are acknowledging asset management’s importance in the global economy and its stewardship role, and have consequently shined a larger spotlight on the industry. Recently IOSCO asked whether the asset management industry presented a systemic risk.

“We all know the industry is not [a systemic risk] in and of itself,” Corley said. “We’re investing in real assets, real companies, and in real opportunities. But given the scale of what we’ve been given to manage, the spillover effects could be significant. What this means is that: If we catch a cold, will others get pneumonia?”

Regulators and governments are focusing on this question of contagion.

Changing Industry Dynamics

When it comes to the most fundamental shift in the investment industry — from active management to low- or no-cost passive — Corley feels a tipping point may be nearing for active managers. “We’re only at stage 101 on the focus on costs,” she noted.

With pressure on fees, investment firms will no longer be able to “price on” many costs. In Europe, for example, sell-side firms are already required to either absorb the cost of research previously covered by soft dollars or blended arrangements or set up explicit client agreements to pay for it.

The new technology that asset managers must invest in to remain trusted counterparties — whether it is cybersecurity or improved data security, information flow, or communication — drives costs as well. “If we want to engage clients digitally, it will take investment,” Corley said.

Corley also highlighted how clients increasingly want customized investment solutions with competitive fees.

“We can’t just scale up on a unit cost basis and pump out product,” she said. “Clients don’t want something you’ve made for someone else.”

Clients want a commitment to knowledge transfer, to educating them, so that they gain a deeper understanding of their investments.

Finally, in their drive for greater alpha, clients want a more diversified set of opportunities, most often through private investments, whether private equity, venture capital, early-stage investments, or hedge funds. This brings with it a whole host of governance and reporting challenges. Yet, as Corley explained, these asset classes are at the heart of creating innovative solutions for clients.

Corley summarized it well: “Clients want more for less — good value for their money, investments suited to their needs, not someone else’s, and to be taken on a journey to better understanding.”

Capturing Societal Alpha

Corley believes strongly in environmental, social, and governance (ESG) and social impact investing. In fact, she’s working with the UK government on how best to encourage them. “The possibilities for thematic investing to achieve societal alpha allows clients to meet both personal and investing goals,” Corley said. This segment could also be a competitive edge for asset managers, she noted, since it’s also hard to replicate as a passive investment.

Corley warned investors about authenticity in the ESG space, however, and said she’s disappointed with the integrity and transparency of the offerings of some managers who are trying to “greenwash” their funds.

Demographic Challenges and the Holy Grail

Turning to the demographic challenges in OECD countries, Corley observed, “The number one issue in retirement is income. It’s about longevity, the cost of care on a long-term and sustainable basis, and how investment managers can help clients live out their lives well in a world of uncertainty.”

To meet this challenge, the investment industry needs to come together to create “income solutions at the right price,” Corley said, for both retail and institutional clients. She called this the “Holy Grail.”

What It All Means for Asset Managers

“Value is defined by the client,” Corley said. “You’ve got to demonstrate that you’re putting their interests first.”

She concluded her talk with a series of thoughtful steps to help improve client collaboration:

  • Clients expect collaboration and engagement around solutions and outcomes, not products.
  • Engage clients around knowledge transfer, particularly about alternative and private investments, and for governance or environmental issues.
  • Put effort and energy into building client trust and belonging around ethical values, codes, and standards.
  • To solve complex client problems, investment firms need to create an inclusive mindset in which different ideas and perspectives are heard and build a diverse employee base to mirror that of the clients
  • Investment professionals need to be good listeners. Those who excel at this will have a competitive advantage.
  • Transparency and communication lead to understanding. But transparency does not mean a data dump, nor is it a substitute for trust. Show performance net of fees.

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All posts are the opinion of the author. As such, they should not be construed as investment advice, nor do the opinions expressed necessarily reflect the views of CFA Institute or the author’s employer.

Image courtesy of Nicola Laing

About the Author(s)
Julie Hammond, CFA, CPA

Julia S. Hammond, CFA, CPA, is Director, Events Programming on the Marketing & Customer Experience (MCX) team at CFA Institute, where she leads the content planning for the Alpha Summit series of events. Previously she was the lead content director for a number of annual and specialty conferences at CFA Institute, including the Fixed-Income Management Conference, the Equity Research and Valuation Conference, the Latin America Investment Conference, the Alpha and Gender Diversity Conference, and the Seminar for Global Investors, formerly known as the Financial Analysts Seminar. Prior to joining CFA Institute, she developed strategies for pension, endowment, and foundation fund clients at Equitable Capital Management (now AllianceBernstein), and she has also worked as an auditor for Coopers & Lybrand (now PricewaterhouseCoopers). Hammond served for a number of years as chair of the investment committee for the Rockbridge Regional Library Foundation. She holds a BS in accounting from the McIntire School of Commerce and an MBA from the Darden School at the University of Virginia.

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