Martin Flanagan thinks investors aren't taking enough risk -- or they're not taking the right kind of risk.

This afternoon, Flanagan, the CEO and president of Invesco, gave the opening address at the Money Management Institute's fall conference. Several hundred industry members gathered in the main ballroom of the Crown Plaza Hotel in Manhattan -- many standing in the rear of the room -- to hear Flanagan's 35-minute speech outlining the challenges the asset management business will face in the coming years.

These aren't the risks that analysts foresaw -- and some investors and advisors still don't see them.

"I remember ten or fifteen years ago hearing fantastic predictions about the future of our business," said Flanagan. "These predictions are now hitting the industry with full force, and we're feeling the impact."

Among the changes are, globally, the rising economic strength of China and India, and, in the U.S., the wave of retiring baby boomers and post-crisis economic insecurity.

"Importantly, from all these considerations, from all our experience, a clear picture is starting to emerge of what it takes to be successful for our clients in the new world," Flanagan said.

One of the main points that Flanagan emphasized, and returned to several times in his speech, is "the risk of avoiding risk." He thinks that the market has reacted to the financial crisis with an excessive fear of equity.

"Investors are staying away [from equity] in droves," he said. Investors' and advisors' fear of equity, he said, is "one of the greatest risks taken today."

Though he thinks that developed nations will continue to account for "the lion's share" of assets in the industry, "the most successful clients will be those who provide their clients with global market expertise."

And the wave of baby boomers reaching retirement age is not having the impact that analysts predicted it would, Flanagan explained. For instance, it hasn't provided the boost for retirement income products that some hoped; fixed income and dividend-paying equities remain much more popular income solutions than annuities.  

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