Why I work in asset management
You’re at a dinner party. The conversation is light-hearted and the company is great. Everyone is having a good time. Wine is being poured and every now and again the table erupts with laughter. It’s a pleasant evening and the night is still young. You’re tucking into a delicious steak, when a charming lady sitting next to you turns around and asks, “So what do you actually do?”
It’s a question I dread. Up until now I’ve never really managed to give a good answer without leaving the person slightly confused. To be honest, even to this day and despite my best efforts my family barely knows what I do.
I’ve told them countless times that I’m not a banker, yet I’m expected to know about mortgages, student loans and how to open a bank account. And, those that do finally figure out that I work in asset management, ask frustrating questions like, “how can I double my money if I give you £100?” I mean, how am I supposed to reply to that?
I’ve been accused of accepting bank bailouts, rigging LIBOR and not lending enough to small businesses. I’m the reason why there was a financial crisis in 2008, although no one quite knows how I did it. And, no matter how much I protest, I still bear the mark of Cain to this day for my ambiguous misdeeds.
They assure me though that it’s ok. Someone has probably got to do what I do, what ever that is. It is after all, not my fault I was born greedy. Well cheers Gordon Gekko.
But seriously, if you really are interested and feel a bit in the dark, these YouTube videos explain what the financial crisis and the LIBOR scandal was all about. See, I told you I was innocent.
Now let’s get back to that dinner party conversation.
“I work in asset management”, you reply.
There is stunned silence. Jaws drops. Everyone around the table has tuned into your conversation. The host laughs nervously. You can hear them collectively think, “You do WHAT?”
I’ve been in this situation so many times it’s funny. Assuming, this is a British dinner party, people don’t tend to say what they think in real-time. I could be sat there, dressed up as Eddie the Eagle and this would probably be perfectly acceptable, albeit slightly weird. My attire would be discreetly ignored and the dinner party would go on.
Eventually someone will politely replies, “How interesting!”
This is usually followed by smiles, feigned intrigued and artificial acknowledgement. The conversation then gently steers away from this confusing distraction – my career.
Well, I can’t really end this post here, even if you want me to move on to another subject. If you bear with me I will explain why it’s not really what I do that matters – it’s why I work in asset management.
Long before the financial crisis, when I was still studying Economics at University, I had the great honour of undertaking a placement year at a small Mayfair-based discretionary manager called Bestinvest. When I left, the then CEO and founder John Spiers gave me a book called “The Intelligent Investor” by Benjamin Graham. I still have that same well worn, coffee-stained copy of this book today, sitting on my bookshelf.
This book changed everything for me. It was the first book on investing that I had ever owned. While today I don’t agree with everything Benjamin Graham preached, his ideas inspired me and changed the way I thought about investing to this day.
This is the reason why I joined the asset management industry after I left university. I wanted to be part of the action and challenge the issues that bother me.
Let me share them with you.
1. If you’re my age or younger you won’t retire
This is something that upsets me quite a lot because it affects a lot of ordinary hard-working people. It’s quite disgraceful that in the world’s most advanced economies, governments have washed their hands of this issue.
Let me share with you some numbers. According to a report published by Citi, titled “The Coming Pension Crisis”, the total value of unfunded government pension liabilities for OECD countries is $78 trillion. In the US, S&P 500 companies face pension deficits of $403 billion and in the UK, FTSE 350 companies have estimated pension deficits of around £84 billion ($119 billion).
Demographic changes such as increasing longevity and a rising ratio of retirees-to-active employees have largely caused this crisis. However, the governments we have elected have done little to prepare for this eventuality. In fact, there is a good chance that state-pension systems won’t exist by the time I turn 60 because of this reason.
Corporate pension liabilities are meanwhile, of little interest to me and here’s the reason.
If you are my age or younger, most companies no longer set up their pension schemes in a way that makes them responsible for paying you an income when you retire.
This means that the responsibility of receiving a future retirement income rests on you and how you manage your pension portfolio. The problem is that the contributions you and your employer are making into your pension are probably not enough. If your pension portfolio tanks, then that’s your problem – not the government’s or the company you work for.
It’s probably a good idea to start thinking about setting up a private pension plan or start building an investment portfolio for the future. That is of course if you want to retire.
2. You’re going to live in poverty to send your kids to university
I don’t feel this is right. You shouldn’t have to struggle financially to send your kids to university. A good education should be seen as a basic human right, not an activity for only the privileged.
If all our children had an equal chance of going to university, it levels the playing field between the ‘haves’ and the ‘have nots’. It creates a fairer and more ambitious society. Unfortunately, times have changed and in many developed markets, governments are unwilling to foot the bill.
As a father, this worries me. I don’t want my kids to ever have to face the burden of a horrendously large student loan. I don’t want them to start their working lives in debt. And, I’m sure you feel the same way. There is a great report that was published recently by the Sutton Trust titled, “Degrees of Debt”, which tackles this issue head-on. Take a read if you have time.
The sad reality is that a lot of us don’t have a choice on this matter, unless we act now and start investing for our childrens’ future. This is a good time to start building an investment portfolio if you haven’t already done so.
3. You will never be mortgage-free or live rent-free
Now this is something that really makes me very upset. One of the consequences of ultra low interest rates and previous rounds of quantitative easing is that it has caused house prices to rise to extraordinary levels.
The average age of a first time buyer in London – my beloved hometown – has hit 37 years old. And even then these new homeowners are saddled with so much debt that they will be mortgaged for the rest of their lives. I’m sorry, but this isn’t good enough.
Do you want to be in this situation? No? Then start investing now.
I chose to work in asset management because I want to be a part of the solution that helps people just like the ones I mentioned above.
Here is how I try to do it. I am an investment writer. My job is to create and curate valuable information for the investing public. I want to help investors by making them more knowledgeable about the economy, the markets and investing in general. It’s a relationship built on trust and the understanding of their needs and worries.
I appreciate that investing can seem complicated, but if I can show these investors how exciting and interesting it is, then it makes investing a lot easier. My goal is to show them how relevant investing is to the lives they lead or the individuals they represent.
What an asset manager does is not that difficult to understand. They are hired to serve the investment needs of individuals and larger institutional investors, such as pension funds. Their aim is to use their expertise to preserve and grow the wealth of their investors by investing on their behalf.
Now listen. The asset management industry certainly isn’t perfect. The industry is becoming increasingly commoditised and detached from its investors, saturated with passive products. There are active managers that charge their investors too much for doing too little – for instance, hugging the index. Some see themselves as vendors of financial products when their investors are screaming for solutions – it’s in danger of become like retail banking pre-financial crisis if you remember.
I am well aware of some of the industry’s weaknesses. However, what I wanted to share with you is what inspired me to act. This is what has motivated me on my journey, five asset management firms later.
It has not been easy and I have seen a lot of things I don’t like. But along the way I have also managed to find my calling.
That’s why I work in asset management.
