GLOBAL - The fee structures of asset management firms are a threat to their own survival, claimed an article in Watson Wyatt's Global Investment Review 2007.
The article suggested asset managers take steps to change their remuneration structures, which “tend to favour” themselves rather than their clients.
The four steps recommended included: aligning interests with both their clients and their employees; incentivising employees through “appropriately structured compensation”, preferably equity; co-investing alongside clients; and putting in place a “well-designed” performance fee.
Roger Urwin, global head of Investment Consulting at Watson Wyatt, commented: “In the new investment services marketplace, with mainstream firms adapting and competing with absolute return firms, organisational and compensation alignments to motivate people in the pursuit of value have become paramount.
“Increasing specialisation by risk, style and asset class should push such alignment considerations to the top of the investment agenda.
“Whichever way you look at it, the price of delivering retirement security to pensioners is dauntingly high. But the cost – in human terms and to corporate reputations – of not rising to the challenge is even higher.”
Standard Life has increased exposure to risk assets in three out of five funds in its Active Plus and Passive Plus workplace pension ranges.
Some 48% of employers are unaware of the services or help they offer to members of their defined contribution (DC) schemes, according to Aon.
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