Cowdery: Fund managers must spearhead industry reform

Resolution founder Clive Cowdery has called on fund managers to make the financial services industry more investable.

He says the financial services sector needs to be restructured through better collective action by asset managers.

"Over the last decade the financial services has become uninvestable by capital markets," he says.

"It has become impossible for fund managers to coolly and rationally allocate their risk budget to the stocks, securities and bonds of financial institutions.

"The reason they cannot do that is you need to understand the likely predictable financial behavior of the stocks and bonds you are buying, and what we have seen over the last decade is we cannot make that kind of prediction."

Cowdery, who was speaking at last night's OBSR Honours Awards in London, says the reason for this is the lack of transparency in financial institutions.

He says financial companies mainly fall into two 'camps': either too small to control their destiny or too large and complex for an investor to predict their financial behaviour.

Fund managers should be at the forefront of transforming financial services, which Cowdery says will lead to increased consolidation and deconsolidation.

"Who should lead that change? It should be the financial management industry. Public markets, not private equity, not corporate raiders, not vultures, not people that will take your stock off you at the bottom of the cycle and then force you to buy it back at the top of the cycle," he says.

Although he is critical of the previous lack of co-ordination shown by the industry, he concedes this is beginning to change,

"One of the reasons this has been hard to do in the past is the fund management industry has been very individual in the way it has expressed its views to management," he says

"However, I think the last year has contained some encouraging signs about the willingness of fund management groups to form consensuses quite quickly."

Cowdery ended his speech by warning the audience of the dangers of resisting these changes.

"We will fall into one of two camps: Those that wish to resist the arrival of such change , or the accelerators, who say 'this is going to happen over the next period of my career and I'm going to be in a position intellectually and emotionally to want to work with the wave of what is going to happen'," he says.

"It is only fear which stops us doing that and fear is generally a pretty poor path in which to plan our own careers."