CFA Institute, the investment management industry’s global think-tank and lobby group, has come out with a very strong challenge to the investment industry: “Transform or risk being disintermediated.”

“This is a very important moment in time for the investment management industry. There are great opportunities going forward, but there are also some significant trends,” says CFA managing director Nick Pollard in an interview with The Asset.

Current market challenges are forcing the investment management industry to adapt itself to new market realities. A recent CFA study that includes findings from a survey of 1,145 industry leaders worldwide reflects this trend.

“For those people who are running the investment management industry, they have to come out with their own responses to how their own organization plays this out, and which aspects they want to embrace and which ones they want to downplay. Doing nothing is not a solution,” says Pollard.

Market developments affecting the industry include uncertainties brought about by geopolitical developments such as Brexit, Trump’s election, and regulatory reforms. The emergence of disruptive technologies and the low-yield market environment also are weighing on the industry, the study showed.

To adapt to new market realities, CFA recommends that the industry focuses on “new skills for new circumstances”. Recruit and develop talent along new dimensions and improve diversity.

“The industry’s biggest challenge is finding leaders who can articulate a compelling vision for the institution and instil an ethical culture. Improving diversity is linked to better performance and culture,” Pollard says.

Balancing fiduciary responsibility by putting the interests of clients first when determining an investment strategy; limiting conflicts of interest; and investing to the standard of care of a prudent expert are also important going forward.

Restoring industry trust by emphasizing strong values and showing societal responsibility are highly recommended. Communicating early, fully, and often helps fill gaps in understanding, the study notes.

“We expect to see more consolidation, greater pressure on margins, and a louder voice from the consumers. The key aspect out of all these is rebuilding trust – turning trust, transparency and assets into a competitive advantage,” Pollard adds.

CFA notes that the future of the investment industry is important for the functioning of the global economy as well as the approximately two million it employs, and the clients and end investors that depend on it to manage US$100 trillion in assets.