“I read some interesting statistics the other day,” says Doug Sharp, when asked what question should be of most concern to professional investors today. “Some £ 220bn has ended up in UK bank accounts since March 2020 while over the same period we have only seen £ 10bn in net flows into the asset management industry. And, UK savers now hold £ 2,000,000 in cash, which is bigger than our industry as a whole.
“You must be wondering what these numbers imply – and, more specifically, what are we doing wrong as an industry that we don’t hire people for? Every statistic you read suggests that people will be living on one-third to one-half of their pre-retirement income, so how are we going to help them understand the importance of taking the right level of risk in exchange for better returns?
“Our industry has such an important role to play in sustaining people’s standard of living, but many don’t really understand what we’re doing. It strikes me as a question every advisor and asset manager should think about: How can we make investing more accessible to people and help them understand its importance? “
Ideas of cooperation, partnership and building closer working relationships – whether with advisors or end investors – are a constant theme throughout our conversation.
“The asset management industry is democratizing a bit and that must be a good thing,” says Sharp, who joined Invesco after consulting McKinsey & Co in 2008, becoming head of retail EMEA in 2015 and CEO. of Invesco EMEA four years later. .
“We have seen consolidation in the value chain, technology become more powerful and customers become more educated, which means everyone has to be a lot more customer-centric than before. It used to be that asset managers felt like they were creating a product and pushing it down the chain, but now there is a much deeper understanding of investor needs and the capacity building to target those needs. This should lead to better results for clients.
For Sharp, getting a feel for what investors want involves “a lot of conversations with a lot of middle customers.”
“We have set up customer forums where we just ask open ended questions about what they hear and what we could improve,” he continues. “The key is to be open to feedback, take it into account and try to respond to what we hear. Historically, it’s not something our industry has been great at. “
General themes that recur with increasing regularity in recent years include costs, environmental, social and governance (ESG) factors, the use of technology and increasing sophistication across the value chain.
“The days of universal and boilerplate backgrounds are increasingly over,” suggests Sharp. “The middleman community now wants specific market views and specific investment strategies that are exactly what they are trying to accomplish.”
Take ESG considerations, which Sharp estimates will take up about half of any customer meeting given these days. “From a product development perspective, an investment perspective, and a thought leadership perspective – for example, clients who are wondering how to best implement ESG in their portfolios and exercise influence – ESG is absolutely a theme, ”he continues.
“You won’t be surprised if I tell you that we take ESG very seriously and this is probably the area in which we are investing the most resources as an organization at this point. We have assigned a large number of people to our centralized ESG team and all of our investment teams take this very seriously, which five years ago, if we’re being honest, might not always have been the cases in some areas.
“Now, however, everyone understands that our customers want ESG, so we have no choice but to do it – and do it right. Delivering what it says on the tin is first and above all what we aspire to as an organization and ESG is no different. As far as we say we have an ESG product, governance structures, investment risk structures, first and second. second lines of defense, it’s all about providing customers with what we say we will do.
When it comes to technology, while most asset management firms will readily agree their industry should harness its power better, Invesco has not been shy about putting its money where its mouth is. Accustomed to the occasional investment house buyout over the past two decades, it was the group’s forays into the tech sector – notably its 2018 buyout of technology advisory platform Intelliflo – that more recently attracted the market. Warning.
What is the thinking of the business here? “Over time, asset managers have moved further and further away from the end customer – in effect becoming suppliers of components to intermediaries and other advisers,” observes Sharp. “The question then becomes, how can we deepen our relationships with these customers? Since we bought Intelliflo in the UK, we have made a number of smaller targeted acquisitions, primarily in the US.
“Now Intelliflo Executive Chairman Nick Eatock is pulling it all together into a very smooth end-to-end technology solution – we’d say industry-leading – for advisors who will be able to do pretty amazing things, both here and in the United States. It’s a work in progress – without a doubt – but I’m absolutely convinced that, done right, we can eliminate a lot of the headaches from advisers.
“Speaking to advisors, we always hear that if they bring in a discretionary fund manager, say, the whole process can be very complicated and administrative. The strategic imperative for us then became how we could create solutions, integrate them with technology and make everything so that advisors didn’t have to worry about any of those things and could just focus on the business. service to their customers.
“Intelliflo will remain an open architecture – it has to because it is an essential part of its business model. So at Invesco, we see ourselves as a customer and partner of Intelliflo, rather than being some kind of “heavy body” in the equation. We anticipate that our ability to partner with the company will be incredibly powerful over time and the biggest offering we are currently in the market with is the model portfolio service.
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“Simply put, this is an integrated solution that builds on Intelliflo technology while Invesco, in effect, builds model portfolios. Rather than an advisor having to do all the associated administration, everything happens in one click. Our plan now is to add additional services in this vein that can really make the advisor experience a lot simpler, a lot more straightforward. “
Looking to the future, Sharp – unsurprisingly – sees technology continue to democratize asset management. “This will allow much more targeted results – a lot more personalization – for consumers,” he predicts. “It depends on what blue sky you want to reach, but you can imagine, through fractional stock trading, tokenization, blockchain, etc.
“It will be a great trip and it will take time, but this democratization through technology could give people liquid access to real estate, infrastructure, private equity. The things that we could do with technology, once it comes of age, is going to be fascinating. This will fundamentally disrupt our industry – a challenge for advisors and companies like us, but a game changer for the end investor. “
A more UK-specific asset management challenge that Sharp sees is how Brexit ultimately plays out. “I would like to avoid the politics of this whole situation, but it’s worth watching,” he argues. “You would probably point to the US and UK as the two epicenters of global fund management, so it will be interesting to see if the UK can maintain its place there or if a mainland European market starts to grow. get in there. “
Shifting from Brexit to regulation, Sharp thinks the Financial Conduct Authority (FCA) has struck the right balance between the need to protect end investors while providing some leeway for asset managers to do the best job. possible? “Being a regulator in any industry is difficult and the FCA has a very difficult job,” he replies.
“For the most part, I would say he has the right balance. Arguably we hear more about client protection in the UK than anywhere else in the world and it seems fair – in some parts of the world client interests are not particularly well protected. As to whether the FCA gives us the space we need, well, we have the advantage of being a large, global asset management company with a lot of resources.
“An open-ended question I would ask myself is, if FCA wants innovation to deliver better results for clients, how do you balance the level of regulatory burden in the UK with the desire to attract? more entrants and more innovation in the industry?
As I said, we have enough resources to carry the regulatory burden and do what we need to do. I’m not sure small and medium-sized businesses would necessarily say the same thing.
Returning one last time to its themes of cooperation and partnership, Sharp concludes: “Sometimes, as an industry, we can find ourselves in a slightly contradictory position with the FCA. I fundamentally believe that doing a great job for our clients is the reason most people in asset management come to work every day – but sometimes I’m afraid the FCA doesn’t necessarily think that’s a true statement.
“Nonetheless, I actually think our incentives are all aligned – asset managers want to do a good job and we want to make sure consumers get good results, which is exactly what they want too.
“Far from being on either side of the table, we more often have the impression that we are all sitting on the same side of the table – only maybe with a different perspective. “
This article first appeared in the September 2021 issue of Portfolio advisor magazine.