According to a recent article published in the Financial Times, asset managers should seriously consider a recent proposal by Mercer that would completely overhaul the relationship between asset managers and their clients. Mercer suggested that asset managers should pay investors to run their portfolios and provide performance guarantees instead of earning fees, regardless of the returns delivered to their client. The influential consultancy urges the rebalance of a system that a growing number of investors and regulators believe prioritizes profit for asset managers over clients` interests.
Mercer`s proposal is aimed at restoring savers` trust in asset managers, with the latter set to retain any additional gains they make from active stock-picking after delivering an already agreed upon guaranteed return. The proposal increases the accountability of asset managers, ensuring that they have “skin in the game” by ensuring that potential shortfalls in performance are paid out of their own pocket. If applied, Mercer`s proposal would not only lead to a restructuring of asset managers’ business models, but also to a potential paradigm shift in the way we think of investments.
To read the full article in the Financial Times, please see here.