By Elizabeth Wilmot

REBUILDING trust is a vital step to regaining the confidence of nervous investors, who are generally still risk-averse, according to a panel of asset management experts at the Fund Forum Asia 2009 held at Shangri-La Hotel last week.

Mr David Seymour, global head of investment management for financial advisory firm KPMG, said: 'High-profile frauds such as the Madoff and Stanford cases have made investors very nervous. The investor community is rattled, and confidence will not return easily.'

He added: 'The most important challenge is to rebuild trust and confidence through strong customer relationship management. Historically, the most successful investment management firms have been those which focus clearly on their customers.

'While the immediate outlook remains uncertain, the medium- and long-term opportunities are tremendous. Those investment funds which keep their nerve, concentrate on improving transparency and communication with customers, and get themselves in shape for the new financial world order stand to enjoy an exciting and profitable future indeed.'

Mr Lester Gray, chief executive of the Asia-Pacific arm of asset management firm Schroders, said: '(In this) current climate, there is more demand for regular- income, low-risk products.'

Ms Madeline Ho, managing director of Singapore and South-east Asia for fund manager Fidelity, said it was 'natural for investors to be risk-averse' in the current climate, but she was optimistic about the fund management industry.

'The reversal to simplicity...bodes well for the mutual fund market where it's transparent and (has) professional management,' she said.

The panel also discussed other reasons that could have contributed to the loss of investor confidence.

Mr Hugh Young, chief executive of the Asia-Pacific arm of Aberdeen Asset Management, said: 'What's been happening...is that fund managers have been deceiving their clients. Their promises are not being delivered.

'Many financial institutions, they got into asset management, which is not really in their DNA.'

He added that what saddened him was how 'asset managers have lost sight of what they are doing in terms of long- term investment horizons' and 'for whose benefit they exist'.

He said asset managers should 'think as asset managers, think as investors rather than product peddlers. Offer our clients what is good for them'.

The panel also offered some tips on how investors could guard against fraud.

'Investors should look at their own risk tolerance...and understand the product or investment (that they have put in), doing their due diligence,' Ms Ho said.

She added that 'fraud can never be totally eliminated', but there were early warning signs to look out for.

Mr Gray commented: 'It comes down to basic human instincts. If it sounds too good to be true, it probably is.'

This article was first published in The Straits Times.