When the whole industry is perceived to be under a cloud, protecting your own company’s reputation is never more important or challenging.
This is the situation currently facing many asset management firms as we enter 2018. Increasing regulatory scrutiny and the rapid development of digital technology helped to expose the fund management industry as ill-prepared for public viewing, and the sector has been struggling to rebuild its position of trust with investors of all types.
This is not to say that fund managers, just like other businesses in other sectors, had not become reasonably adept at handling those issues that life occasionally threw at them – manager or senior exec departures, outflows and under performance, for example.
For all but the largest and well-known, doing so in the relatively closed universe that asset managers used to inhabit, versus the brave new world that asset managers are now being propelled towards are two entirely different things, however, and require a very different mindset. You cannot proclaim social value at an industry level without also admitting public interest at an individual company level.
The general approach and processes for managing crises are dealt with elsewhere in this newsletter, but the imperative for protecting your reputation has never been greater. Whilst we often talk about the ‘retailisation’ of the investment market (i.e. the shift towards fund-based products, such as DC pensions), the ‘institutionalisation’ of the funds market is just as important.
Irrespective of how the funds are packaged for the end investor, professional fund selectors are increasingly choosing funds and fund managers in a similar way to that of long-term, large scale, strategic investors, such as large corporate pensions, foundations and family offices.
These criteria go well beyond hard performance statistics and analytics and into the realm of much ‘softer’ data, and the reputation of the product provider is increasingly significant in that process. So that poorly handled crisis now becomes a clear ‘sell’ or ‘do not buy’ signal.
News, particularly of the bad variety, is global and travels fast. It does not recognise legal jurisdictions or national borders. This creates further complexities for an industry where intermediation either by consultants or financial advisors has become king and the distance between the product provider and the end investor has seemingly reached its zenith.
Asset managers often operate in peripheral areas with very small client-facing teams covering fairly large regions, and this can create real containment issues. An uncontrolled crisis can quickly become a global game of “whack-a-mole”.
Avoiding that requires not just the existence of an effective and road-tested crisis playbook, but also the ability to allocate skilled and experienced resource to where it is needed most. Your reputation is hugely valuable and its vital to protect it.
This article is part of our special edition Crisis and Issues Management newsletter.