Those well known investment experts, Simon and Garfunkel, way back in 1970 stressed the importance of keeping the customer satisfied.
It’s a point that shouldn’t be lost on investment managers. I imagine most managers think they have a clear sense of what their customers want from them. Fact-finds, for example, may give them a good sense of how their customers feel about taking risk. The manager can then assign the customer to one of the (very wide) industry-accepted risk buckets.
But does the wealth management/investment management industry really have a solid handle on what their customers want?
What do customers say?
Recently, the Chartered Institute for Securities and Investment (CISI) hosted a session where a survey of what fund investors want from their funds was unveiled. This useful survey covered a range of issues, and some of the responses might surprise.
What wasn’t a surprise was the importance of investment performance. For most investors it was an ever present feature in their top three requirements from their fund. And it wasn’t about shooting the lights out with spectacular returns. The majority of fund owners would be happy with average returns in the 6 or 7% band.
There was also a lot of common ground around what were the main concerns of fund investors. The biggest worries for customers were around issues like the risk of capital loss or sharp volatility in markets. Again probably not a surprise, but financial concerns like these came in way ahead of issues like the environment or ethics.
This appetite for risk and the demand for return clearly reflect why investors bought funds in the first place. Retirement and family financial well-being feature heavily in why customers put money into funds.
What about sustainability issues? Do these matter a lot for fund investors? This is interesting given how much it is a key driver on the investment manager side of the industry.
It was rarely among the top issues for fund investors, but it did feature. What was interesting was the difference in how different age cohorts viewed “ESG”. For younger investors, those under 40, it was a consideration. Less so for those in the 40-60 age bracket and quite far down the list for those over 60.
A recent report from EY looked at asset management priorities for 2025 and stressed the need for investment managers to embed sustainability in strategy, governance and operations. Asset allocations should be guided towards diversity, transition, the blue economy and similar areas.
In some geographic areas we have seen some push-back, often influenced by politics.
What the survey showed is that sustainability issues do matter. Well over half the customers said that such factors needed to be considered. But also a significant portion weren’t overly concerned about them. And this number varied a lot depending on the age profile of the investor.
The message for investment managers is that there may be a need for enhanced communication and education, as well as a more nuanced approach in the fund offering. Choice should remain a key part of any investment proposition.
Tradewinds 