Russell Investments chairman Michelle Seitz told a conference in Wellington the asset management and advice business was going through enormous amount of change.
“We are seeing the biggest structural change I have ever seen in this industry,” she said, adding there was an “enormous sense of urgency.”
Seitz said the industry had been coasting along and operating on high margins which were unsustainable in the future.
“Data masks a lot of sins in this industry,” she said. “It’s been possible to run a bad business and still do well. We as an industry need to change.”
She said there were too many layers and there needed to be a period of “creative destruction” to take cost out of the equation.
“[There are] too many active managers. Too many vehicles. Too many layers.
“Active management is under duress. We don’t need so many. It’s a zero sum game in the active side.”
She said the level of fees was too high. When returns were in the single digits “you can’t take a third out in fees. It’s irresponsible.”
Getting costs lower and returns higher would be good for the industry – although that would mean a pay cut for some in the industry.
“I do think we all will get paid less.”
Margins were too high and needed to come down. “No one’s going to go broke, no one’s going to get poor.”
Technology would play a big role in bringing costs down and Seitz singled out blockchain as one of the tools which would do this.
“Blockchain will disrupt distribution,” she said. She said it would make it a better industry for clients – but there was a need to get it right, and right now.
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