Given the fact that this year was one of the worst that mutual funds have ever faced, MarketWatch's Chuck Jaffe has some advice for mutual funds that might startle even the most dyed-in-the-wool manager.

“For people who have lost faith in funds, you may not be able to make it up to them ever,” he warns.

But for those interested in trying, Jaffe suggests that fund companies be more straight-shooters about their investment outlook and counter that bad news by adjusting their funds’ investment mandates to become more like go-anywhere funds, so that they can logically pile up on cash or other safe havens.

Along those lines, funds should reveal their holdings or strategies more often, he says. When markets take a wild swing, send out an e-mail immediately to shareholders, he suggests. “Managers shouldn’t keep shareholders in the dark,” he writes. “When a fund takes a violent swing, management should say why—in real time.

“After a year like 2008, fund managers need to justify their existence,” he continues. “Whatever the reason, they need to say something, specifically addressing why they provided little or no downside protection.”

And despite indications that some fund companies are likely to raise fees next year, investors would warm up to companies that actually decrease them, he suggests. Given the deals abounding in retail, that might not be such a bad idea.

As Jaffe reasons, a major reason why fund assets are so low is because of poor performance, so why not “give investors a break and hold the line on costs,” he argues. “It’s the least a fund company can do.” Specifically, he take aim at antiquated 12b-1 fees.

Finally, if a fund manager has skin in the game, that could be a compelling reason for shareholders to remain alongside them. Too few fund companies require this, and those that do, could certainly tout it better, Jaffe says.

Subscribe Now

Access to premium content including in-depth coverage of mutual funds, hedge funds, 401(K)s, 529 plans, and more.

3-Week Free Trial

Insight and analysis into the management, marketing, operations and technology of the asset management industry.