The current (August 27, 2011) issue of Barron’s has published my op-ed,”Why the Fund Industry Needs Shareholder Advocates” in its “Other Voices” section, page 45.
The op-ed cites the need for fund companies to more aggressivly demonstrate they are acting in their own customers’ best interests.
While this may seem an obvious thing to do, the fund industry in general is governed by a sales mentality, which puts the needs of fund wholesalers and other sales-support poeple before those of the fund company’s own shareholders.
As a result, those load-fund companies, which are primarily sales organizations, do not have the same goals as their own customers.
This diminishes a fund company’s assumed goal of doing what is in the best interests of shareholders and helps explain the conflict-of-interest argument which is a key element of the discussion on the need to adopt a fiduciary standard.
In short, the essay makes the case that good corporate governance is good marketing and vice versa. It is also cost effective and does not require a large expansion of the marketing budget. If anything, the opposite would be true over time.
Or, as the editors of Barron’s said: “Mutual fund companies need to convince the public that they operate in their clients’ best interests. Appointing shareholder advocates—and listening to them—would be a step in the right direction.”
For the specifics, see this week’s Barron’s “Other Voices” column by Chuck Epstein.