Next week, for the first time in over a decade, I will miss the general membership meeting of the Investment Company Institute, the trade association for the mutual fund industry.

The conference is an annual spring love-fest for fund executives, long on schmoozing and short on substance, featuring seemingly annual talks on the importance of maintaining high ethical standards and the need for caution in expanded regulation, with an undercurrent of self-congratulatory backslapping for another year of big profits.

While there are several reasons for my absence, the biggest one is this: The fund industry's top dogs don't say anything of substance when they get together.

So rather than being fed more pablum this year, I thought it more productive to focus on the things that won't be said, the messages that both fund manager and shareholder need to hear to better understand where the business is headed in the future. Since no one in Washington will say them next week, let's get them out for public consumption:

Funds assets are increasingly volatile

How funds respond to the challenge of keeping those assets will go a long way toward determining the future success of both funds and investors.

The problem is not just individual investors moving money around, but rather the 401(k) plan providers and the financial intermediaries repositioning consumer money.

If your retirement plan hasn't changed its fund offerings in the last three years, one of your neighbors probably has lived through a change. While investors may be well served by getting "better funds," studies show they still suffer by moving money around too much.

Plan sponsors and financial advisers move assets for one big reason: failure to meet expectations.

It is imperative that funds define what they intend to deliver, and how they intend to get it to the consumer, and then stick to it. Playing games with investment strategies, fee structures and more may serve to make a fund hot, but everyone involved can get burned. Investors and their advisers should crave funds that provide consistency and inspire confidence.

Investors are not a fund firm's Field of Dreams

For decades, managers have lived by the belief that "If you build it, they [shareholders] will come." It resulted in the creation of thousands of funds distinguished only by their ability to personify mediocrity. It also has led to a slew of bad ideas and poorly executed concepts turned into fund ideas that get investors excited but leave them disappointed.

With the exception of a few large companies with deep talent pools, most firms are good at only one or two investment styles. While fund families may be well served financially from running a fund they're not very skilled at managing, investors are deeply hurt by the practice. The problem isn't just the money lost, but the faith and confidence.

Fund companies do not know their customers

With the bulk of the average investor's money held in retirement plans or third-party brokerage accounts, many funds do not have any real knowledge of who their end user is. Shareholders are part of "omnibus accounts," where the fund knows only that it has, say, 1,000 accounts from the XYZ Corp. retirement plan.

Shareholders may think they have a relationship with the fund, but funds barely know them. That comes out when funds stray from their investment objective, raise fees or do things that any rational shareholder would object to. It's easy to do those things when you don't actually know the shareholders, but that doesn't make it right; funds must stop, even if it cuts into profit margins.

The strong market has improved track records, but hasn't done a thing for confidence

Meetings like this one are filled with platitudes, and the fundies in Washington next week will be all puffed up about how they have helped consumers recover from the bear market. The problem is that many investors are more wary than ever, and have sat out a lot of the recovery because they were so badly burned by mutual funds that were crushed in the bear market at the start of this decade.

When it comes to integrity, talk is cheap and action is everything

One thing I won't miss about the conference is yet another session of executives talking about the importance of functioning with integrity. Prior to 2003 and the fund industry's worst scandals in history, insiders clearly were aware of the problems, but put on a public face that suggested everything was rosy.

Right now, people in the industry are talking about how the bad seeds have been exposed and rooted out. Insiders don't believe it and the public shouldn't either; the fund industry needs to preach vigilance and zero tolerance rather than hyping how the worst is over. There are bad apples in every bunch and the fund world is no exception.

The next 10 years will be awfully complicated

And the fund industry hasn't got a clue on how to properly help consumers through it.

With the baby-boom generation hitting retirement age, the way a big group of consumers use their investments is about to change. They're retiring, and not dying, so the money won't flood out. But people also will need to build portfolios that protect their nest eggs and allow them to live out their days comfortably.

Because most fund firms know very little about their customers, they will have a tough time helping consumers set themselves up for life. That will leave consumers more frustrated with funds, not less, no matter how good a picture the executives paint in Washington next week.

Copyright (c) 2006 MarketWatch, Inc.