A recent Bloomberg article recounts an interview with Peter Kraus, the former CEO of Alliance Bernstein and the man who advocated for performance-based fees for fund managers.

While Morgan Stanley analysts say that a pay-for-alpha system would halve (if not eradicate) the profits of some active managers, the article argues, “the other way of looking at it is that customers would save a ton of money they currently pay in fees.”

Here are some highlights of Kraus’s comments:

“Part of the problem,” he says, “is that the whole industry is motivated by growing assets. It’s driven by shareholders who want revenues to grow, and the way you get revenues to grow in an industry that’s paid whether or not it performs is to grow the assets. As assets grow, it becomes more challenging to perform.”

On whether performance-based fees encourage riskier investments, Kraus says, “that’s not rational,” adding, “If the manager is faced with a performance-based fee with a cap, and the performance based fee resets every year, why would the manager take excessive risk given that  if they outperformed dramatically they wouldn’t actually get paid for it because they would have hit the cap?”

Kraus argues, “the business has to be structured so we can regain the trust of the clients. To do that, you have to align the fee structure with the client. I think the market will force the industry to change.”