– Shreenivas Kunte
Retail investors are important stakeholders in wealth management. However, for a sizable portion of wealth managers the end investor is not the principal source of management income. Instead, compensation is derived mainly through product commissions from asset management companies. As a result, unaddressed misaligned interests have created a trust deficit between retail investors and their wealth management practitioners. From shortterm greed to a lack of transparency, misaligned interests take on both blatant and subtle forms and lead to an ever-widening trust gap. Specifically, perceived and actual conflicts of interest and advisory fees have been a matter of debate and scrutiny for some time.
There is a growing view that a conflict of interest is not a completely insurmountable challenge. On the contrary, sacrificing an adviser’s short-term interests in favour of the client’s is an opportunity to build a stronger foundation for trust. In the context of a fundamental misalignment in interests, it is easy to see the role that transparency can play in reassuring end clients.
Shared awareness on the complexity of the advisory business and a clear understanding of inherent conflicts can help convince clients that their interests matter. This awareness provides a much needed reassurance as to the integrity and soundness of the services wealth management practitioners offer.
(From: Insights on Trust: What Factors Matter Most?)