If the head of one leading United States asset management firm is right, the mutual funds industry will be forced to reduce costs and become more consumer-centric or risk decline.
John Bogle, legendary founder of the Vanguard Group and index fund pioneer, last month warned that fund companies would no longer get away with taking the substantial share of returns they have been used to in the past. They must cut costs or continue to lose investor trust.
Those familiar with Mr Bogle's lifelong campaign against excessive fund fees will also be familiar with his arguments; he has after all been banging this drum for more than 50 years, as he reminded the audience at a securities conference in Atlanta. This time, however, his message had particular resonance for an industry emerging from one of its darkest periods in history.
The past few years have seen the fund industry transformed from a sector trusted with the savings of millions, to something of a pariah. On top of bursting bubbles and a protracted bear market which have hammered returns, it has been hit by fee and brokerage scandals resulting in investigations, lawsuits and new legislation. The rot revealed, observed Mr Bogle, was not caused by just a few bad apples but a whole barrel of them.
It was not surprising that the industry - or its representatives at the Sibos conference - seemed ready for a bit of introspection. And Mr Bogle's advice for those looking to win back trust from investors was to start with fees.
The numbers are also starting to back his argument. Mutual fund costs average 3 per cent of turnover a year, said Mr Bogle. This level of cost may have gone unnoticed during the prolonged bull market when returns were abundant. But times have changed and returns are likely to be more anaemic in coming years, averaging perhaps 6 per cent. Take into account inflation and it is clear that unless fund companies are willing and able to cut their costs, there could be little by way of returns left over for investors.