Fund managers and investment professionals face a harder slog for less money as competition from the technology sector and mounting regulation squeeze easy profits, the head of the CFA Institute said on Thursday.
Change should however be welcomed as a chance to correct the excesses of an industry that is still too opaque when it comes to charging clients, said Paul Smith, chief of the organization whose "Chartered Financial Analyst" (CFA) accreditation is seen as the gold standard for everyone from wealth advisors to Wall Street analysts.
A five-year run of virtually uninterrupted stock-market gains in the U.S. and Europe has boosted assets under management but done little to lift margins for stock-pickers, who have both underperformed and lost market share to cheaper alternatives like exchange-traded funds designed to track indexes.
The rise of automated investment services - or "robo-advisers" - harnessing technology and data is likely to keep up the pressure. Beyond the growing number of upstarts like WealthFront and Betterment, more traditional brokerage firms like Charles Schwab have also turned to algorithms.
"(Technology) is changing the industry. People can see they're not going to make as much money as they used to (and will) work harder for less," Smith told a press briefing in London's financial district.
"The whole drift of regulation is that it's harder to make money in the financial world," he added.
While Smith said that the wider public image of the investment industry had been unfairly tarnished in the post-2008 global banking backlash, he acknowledged the industry had not done itself any favors when it came to fees.
"Have we provided fairly priced products that the public needs? I think the answer is we haven't," he said.
Charges paid by investors are in regulators' sights and the UK Financial Conduct Authority is to launch a market study on asset management to review fees. European regulators are also finalizing proposals to curb fund managers' ability to pay for research using commissions that are charged to the end client.