I recently returned from what I consider to be one of the best finance industry conferences around, the CFA Institute Annual Conference. It’s always an impressive affair, this year attending were over 2’000 of some of the finance industry’s most highly educated professionals, prominent finance journalists, industry thought leaders and yours truly! The list of speakers is always impressive and usually very wide ranging.

This year there were well known non finance names such as Daniel Goleman and Sir Bob Geldof as well as a host of leading thinkers speaking on various financial and strategy related topics. A lot of the content was excellent. Thought provoking and well delivered. Following a few exchanges over the last couple of days on Twitter it strikes me however that these sorts of conferences probably spend too much time focussing on things our clients care little about.

Designed to protect the illusion

The finance industry is obsessed with numbers and formulae, constantly seeking to find better explanations for market behaviour that we may never properly understand completely, looking to lower risk and constantly seeking to eek out a few extra percentage points of return. The vast majority of private clients couldn’t give a stuff about this finance industry bullshit. It’s largely navel gazing and designed to protect the illusion that we’re so much smarter than our clients when it comes to finance that they need to pay away an unsustainable amount of their investments in return for our services.

Trust me I’ve been there. I was basically told by my former employer that I had to go out and sell a fund they were launching but couldn’t deliver full transparency on the underlying managers they were using (it was a hedge fund of funds) due to various confidentiality agreements but that the managers were so large and exclusive that they need have no worries. What a pile of crap!

Big important stuff!

Most of our clients focus mainly on getting from point A to point B with their finances. They may want to ensure they have enough in retirement, they may want to provide for their children or grandchildren’s education, give to charity etc etc – big important stuff. Most of them couldn’t give a stuff about whether what gets them there does so with 16% standard deviation or 14% standard deviation. Most of them couldn’t give a stuff whether the funds we use have an active share better than their peers or whether the funds add value though a three factor of five factor model. All of that is to be honest a load of bollocks. The fact is we’re much further away from being as accurate in our assessments of what are our clients are really after than we are in our assessment of the sources of returns from our portfolios.

How often when you go to buy a car do you make a decision based upon a difference in fuel consumption of 3%, a difference in engine power of 15 brake horsepower? You look for something that will meet multiple goals. The last time we went through the exercise of buying a car eight years ago, we needed something big enough for three (hopefully four) people, luggage capacity for a Scandinavian style pushchair, good fuel consumption and environmentally friendly. We ended up with a Toyota Prius and have to say it has met all of our needs admirably, coupled with excellent aftercare from our supplier. We were in a decent position to be able to assess our own needs in that situation but when it comes to our finances, most of us struggle without guidance to properly assess what we need. If we spent more time focussing on ways and means of doing this and doing it well, differences in standard deviation, adherence to the benchmark etc would pale in comparison to our ability to get our clients closer to where they want to be in a manner they feel happy with.

The foundation of relationships

We need to get better at the people side of our business. How we understand and relate to our clients – empathy. This should outweigh any other focus within financial services. In his speech to the CFA Conference Daniel Goleman Goleman said there are three kinds of empathy:

Cognitive empathy: You understand how a person thinks about things.

Emotional empathy: You tune into the other person. You can build rapport or chemistry.

Empathic concern: That’s what Goleman calls “the Good Samaritan empathy,” or caring about people.

Empathy is the foundation of relationships, Goleman said. The better we get at these skills the better will be the results we produce for our clients.

Broaden your way of thinking

My recommendation therefore: forget that latest book about some new fangled portfolio construction model (it will probably do sweet FA for your results anyway) and read something that can help you relate to other people more effectively or broaden your way of thinking. Try looking anew at the sort of conversations you have with your clients. Are there ways in which you could get to understand them better? Together with my business partner I for one will be reassessing how we interact with our clients with a view to working out where they want to get to and how they’d like to get there and I’ll be talking as little as possible to them about how wonderful our investment strategy is. After all most of them would rather watch paint dry. All of this empathy and understanding is the big stuff. The numbers and formulae etc the little stuff. Only when we get better at the Big Stuff and actually use it properly will the public start to trust the financial services industry again.

I’d like to thank my friend Lauren Foster for her excellent write up of Daniel Goleman’s presentation which I blatantly cribbed from. Thanks to Ben Carlson, Philippe Maupas, John Bowman and Robin Powell for the recent exchange of Tweets on the ‘Big Stuff’ and apologies to any investment nerds I’ve offended (fear not, I like the techy side of our business and am happy to discuss it but this stuff matters more). And to all those offended by any of my language – do one! You’ve heard far worse on any drive to work listening to the radio when a rap tune comes on.

By: Richard Stott, Founding Partner, Connectum

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I’m on the side of those who believe that the vast majority of people benefit from having a human adviser to assist them particularly in the initial planning phase and also when the markets start ‘misbehaving’.

This post isn’t about that debate. Plenty of other people have covered it extremely well in numerous other blogs and articles. This blog is more about why liking your adviser is a whole lot less important than the process they guide you through.

Over the course of the last few years myself and my business partner have come across a number of potential clients with portfolios managed by other advisers. Often the clients have talked about the very good relationship they have with the adviser and how they feel well looked after. When they show us how their portfolios have been constructed however, we’ve often been shocked by how poorly we interpret those portfolios to fit with what the clients want to get out of their finances and proper measures and discussions of their overall need and capacity to take and willingness to bear risk.

Indeed one well know brokerage house here in Norway had constructed a portfolio for a lady in her late 50’s with no other income, comprised purely of Norwegian equities. At the time we spoke to her the portfolio had had a good run but we pointed out how poorly it actually met her overall needs and how it was exposing her to a considerable amount of unnecessary risk. Whilst she appreciated the time and trouble we spent exploring the various issues with her she decided, after a period of reflection, to stay with her current adviser because he was so nice to her.

I hope that things have worked out for her ok but fear that she may have been through a rough time recently given the way the Norwegian market has behaved. Our job as an adviser is not to be a friend who bends over backwards to agree with you and please you. Yes we will always deliver the best service that we can but we’re going to do it combined with a disciplined process which will sometimes involve us disagreeing with you, getting you to reexamine your thinking on certain issues and from time to time flat out telling you that you’d be an idiot to go ahead with a certain course of action.

You need an adviser who can be honest with you, at times brutally so if you want the chance of having a financial plan that works successfully for you. I sometimes tell people that part of my job is to stop them being an idiot with their money and that they’re going to have to pay me for the privilege. That might put some people off – that’s fine with me. If it’s the case they’re probably the sort of people who might think twice about some honest advice when it’s needed most.

A good adviser will be able to demonstrate how their process serves you in terms of analysing your needs translating that into an investment portfolio and other related advice and how they follow up and reassess your plan on a regular basis. If they can’t document this and show you examples of how they’ve employed this process successfully, preferably with client references, then take your money and run elsewhere.

Av: Richard Stott, Founding Partner, Connectum

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I’m on the side of those who believe that the vast majority of people benefit from having a human adviser to assist them particularly in the initial planning phase and also when the markets start ‘misbehaving’.

This post isn’t about that debate. Plenty of other people have covered it extremely well in numerous other blogs and articles. This blog is more about why liking your adviser is a whole lot less important than the process they guide you through.

Over the course of the last few years myself and my business partner have come across a number of potential clients with portfolios managed by other advisers. Often the clients have talked about the very good relationship they have with the adviser and how they feel well looked after. When they show us how their portfolios have been constructed however, we’ve often been shocked by how poorly we interpret those portfolios to fit with what the clients want to get out of their finances and proper measures and discussions of their overall need and capacity to take and willingness to bear risk.

Indeed one well know brokerage house here in Norway had constructed a portfolio for a lady in her late 50’s with no other income, comprised purely of Norwegian equities. At the time we spoke to her the portfolio had had a good run but we pointed out how poorly it actually met her overall needs and how it was exposing her to a considerable amount of unnecessary risk. Whilst she appreciated the time and trouble we spent exploring the various issues with her she decided, after a period of reflection, to stay with her current adviser because he was so nice to her.

I hope that things have worked out for her ok but fear that she may have been through a rough time recently given the way the Norwegian market has behaved. Our job as an adviser is not to be a friend who bends over backwards to agree with you and please you. Yes we will always deliver the best service that we can but we’re going to do it combined with a disciplined process which will sometimes involve us disagreeing with you, getting you to reexamine your thinking on certain issues and from time to time flat out telling you that you’d be an idiot to go ahead with a certain course of action.

You need an adviser who can be honest with you, at times brutally so if you want the chance of having a financial plan that works successfully for you. I sometimes tell people that part of my job is to stop them being an idiot with their money and that they’re going to have to pay me for the privilege. That might put some people off – that’s fine with me. If it’s the case they’re probably the sort of people who might think twice about some honest advice when it’s needed most.

A good adviser will be able to demonstrate how their process serves you in terms of analysing your needs translating that into an investment portfolio and other related advice and how they follow up and reassess your plan on a regular basis. If they can’t document this and show you examples of how they’ve employed this process successfully, preferably with client references, then take your money and run elsewhere.

Av: Richard Stott, Founding Partner i Connectum

Del innlegget:

I’m on the side of those who believe that the vast majority of people benefit from having a human adviser to assist them particularly in the initial planning phase and also when the markets start ‘misbehaving’.

This post isn’t about that debate. Plenty of other people have covered it extremely well in numerous other blogs and articles. This blog is more about why liking your adviser is a whole lot less important than the process they guide you through.

Over the course of the last few years myself and my business partner have come across a number of potential clients with portfolios managed by other advisers. Often the clients have talked about the very good relationship they have with the adviser and how they feel well looked after. When they show us how their portfolios have been constructed however, we’ve often been shocked by how poorly we interpret those portfolios to fit with what the clients want to get out of their finances and proper measures and discussions of their overall need and capacity to take and willingness to bear risk.

Indeed one well know brokerage house here in Norway had constructed a portfolio for a lady in her late 50’s with no other income, comprised purely of Norwegian equities. At the time we spoke to her the portfolio had had a good run but we pointed out how poorly it actually met her overall needs and how it was exposing her to a considerable amount of unnecessary risk. Whilst she appreciated the time and trouble we spent exploring the various issues with her she decided, after a period of reflection, to stay with her current adviser because he was so nice to her.

I hope that things have worked out for her ok but fear that she may have been through a rough time recently given the way the Norwegian market has behaved. Our job as an adviser is not to be a friend who bends over backwards to agree with you and please you. Yes we will always deliver the best service that we can but we’re going to do it combined with a disciplined process which will sometimes involve us disagreeing with you, getting you to reexamine your thinking on certain issues and from time to time flat out telling you that you’d be an idiot to go ahead with a certain course of action.

You need an adviser who can be honest with you, at times brutally so if you want the chance of having a financial plan that works successfully for you. I sometimes tell people that part of my job is to stop them being an idiot with their money and that they’re going to have to pay me for the privilege. That might put some people off – that’s fine with me. If it’s the case they’re probably the sort of people who might think twice about some honest advice when it’s needed most.

A good adviser will be able to demonstrate how their process serves you in terms of analysing your needs translating that into an investment portfolio and other related advice and how they follow up and reassess your plan on a regular basis. If they can’t document this and show you examples of how they’ve employed this process successfully, preferably with client references, then take your money and run elsewhere.

By: Richard Stott, Founding Partner, Connectum

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Britene har alltid stått tydelig på siden av den mest idealistiske del av arbeidet for en ny politisk orden i Europa gjennom en fordypet EU-integrasjon. Det nye i dag er at høyresiden i britisk politikk er blitt ideologisert – slik vi også har sett det i USA – og at dens kritikk retter seg mot selve grunntanken i EU om en egen solidaritet blant Europas stater. Vi savner den pragmatismen som har vært britisk politikks adelsmerke gjennom århundrer, og opplever at Storbritannias rolle som et politisk stabilitetsanker er blitt svekket.

Statsminister David Cameron er havnet i en særdeles vanskelig politisk situasjon. I september i år skal Skottlands 5,3 millioner innbyggere – 10 prosent av United Kingdoms befolkning – stemme over spørsmålet om en løsrivelse fra Storbritannia. En slik løsrivelse er fremdeles ikke sannsynlig, men den kan på ingen måte utelukkes. Meningsmålingene forteller om en skrumpende avstand på under 10 prosent-poeng mellom tilhengerne av dagens ordning og motstanderne. De har halt innpå.

Første paradoks

Et problem for Cameron er at hans konservative parti ved valget i 2010 nesten ble utslettet i Skottland. Derfra sender hans parti bare et medlem til Underhuset i London. Det er også et paradoks at Det skotske nasjonale parti, SNP, som vil bryte opp en mer enn 300-årig integrasjon på den britiske halvøy, samtidig satser sterkt på å bli en del av den europeiske integrasjon i EU. Partiet nærmest lover at Skottland skal bli EU-medlem innen 18 måneder etter et mulig brudd med London.

Her har EU og kommisjonspresident Manuel Barroso pekt på at Skottland må stille som et helt vanlig søkerland til EU og forhandle seg gjennom en full pakke av nye og gamle EU-bestemmelser. Og Skottland må få støtte av alle de eksisterende 28 medlemsland, også av Storbritannia, under og etter forhandlingene.

Skulle skottene virkelig forlate Storbritannia, vil det samtidig innebære en merkbar – og smertefull – reduksjon av britenes politiske tyngde i Europa og i verden. Koordinatene i europeisk politikk vil bli justert. Britisk tenkning og britiske interesser vil telle litt mindre når Europas politiske og økonomiske spilleregler blir utformet.

Et politisk vågespill

Dette siste er også kjernen i debatten om folkeavstemning nummer to: Cameron lovet i januar i fjor en «inn-eller-ut»-avstemning om Storbritannias EU-medlemskap i 1917, hvis de konservative vinner det ordinære underhus-valget i 2015. For øyeblikket ligger Labour-opposisjonen noe foran på meningsmålingene – og valgutfallet er usikkert. Statsministeren presses ikke bare av en meget sterk fløy i sitt eget parti som vil ut av EU, men i voksende grad av det rene nei-til-EU-partiet UKIP, «UKs uavhengighetsparti».

En ting er at UKIP nå ligger an til å bli større enn de konservative ved valget til EU-parlament i mai i år. Enda viktigere for Cameron er det at dette partiet truer med å frata de konservative enhver mulighet for valgseier i 2015, fordi det splitter høyresidens velgere.

I denne situasjonen har Cameron valgt å skjerpe sin kritikk av EU og kreve forhandlinger om en reform av EU-samarbeidet, slik det nå finner sted. Han vil «hente avgjørelser tilbake fra Brussel», lover han. Andre land ønsker også justeringer. Politiske ledere i EU-landene ser at motstanden mot EUs regelverk er voksende blant velgerne, spesielt når det gjelder spørsmålet om arbeidsinnvandring. Men fri flyt av arbeidskraft, kapital, varer og ideer er selv kjernen i EU «indre marked», som ikke minst britene kjempet frem i 1980-årene.

Paradoks nummer to

Her møter Cameron et nytt paradoks: for å få flertall i EU for reformer trenger han støtte fra andre medlemsland, og ikke minst de nye i Øst-Europa. Men nettopp disse landene gjør han til sine motstandere innen EU, ved å forsøke å holde deres arbeidstakere ute. Å finne en riktig balanse her, blir uhyre vanskelig. Også Tyskland og andre «gamle» EU-land opplever et politisk press på grunn av arbeidsinnvandring. De kan kanskje være villige til å justere regelverket noe, med nye overgangsordninger. Men grunnprinsippet om et åpent EU må bevares. Det er ulikhetene i levestandard som får hundretusener av arbeidstakere i EU til å vandre, men nettopp denne vandringen bidrar jo også til å ujevne forskjellene i Europa.

Britene satser mye på at den tyske forbundskansleren, Angela Merkel, som også vil definere arbeidsdelingen mellom EU og nasjonalstatene klarere enn hittil. Kan hun bli Camerons allierte, et stykke på vei? Britene oppvarter henne i London denne uken; hun drikker te hos dronningen og får tale til Underhuset og Overhuset i det britiske parlament – en sjelden ære. Men der er like fullt ulikhetene som er mest i øyenfallende: Britene er bare med på en mindre del av EUs felles-prosjekter. For tyskerne er EU kjernen i deres Europa-politikk, dypt forandret også i den tyske grunnloven.

På EU-hold synes konsensus nå å være at britene og andre kan justere noe på regelverket, men ingen grunnleggende endring – som kunne tappe UKIP og høyrefløyen blant de konservative for støtte – ligger i kortene. Det vi ser er snarere at EU arbeider videre og at integrasjonen blir forsterket, også rundt euro-samarbeidet. Og neste emne er forsterket fransk-tysk militært samarbeid, spesielt når europeerne med Frankrike i spissen griper inn i truede afrikanske land.

EU-land lufter tanker om mer EU-samarbeid i forsvarssektoren. Men her avviser UK enhver form for EU-rolle.

Camerons regjering kjemper for en fortsatt plass for Storbritannia i EU, og de har bred støtte fra britisk næringsliv og fra City. Halvparten av britenes store utenrikshandel skjer med Europa. En isolasjon fra EUs felles marked ville samlet sett føre til et økonomisk tap for britene. Derfor må vi fremdeles betrakte en britisk utmarsj fra EU som mindre sannsynlig enn et fortsatt EU-medlemskap.

For britene er finanssenteret City en nøkkel-faktor når de drøfter sitt forhold til EU. Til manges overraskelse klarte City – med sin gamle, globale rolle og profesjonalitet – å utbygge sin posisjon i finansverdenen også etter at euro-en ble innført på kontinentet. Men vil dette kunne føres videre, når og hvis euro-krisen løses og valuta-samarbeidet fordypes, med sentrum i Frankfurt? Der reiser seg nå de nye kontor-tårnene for Den europeiske sentralbank. De skal være klar for innflytting ved årsskiftet.

Storbritannia med sin rike historiske erfaring og kanskje Europas beste diplomatiske korps kjemper en vanskelig kamp – og den blir enda vanskeligere for statsminister Cameron fordi hans egne svikter ham på hjemmebane. Han ønsker at Storbritannia skal fortsette som EU-medlem – men det er høyst usikkert om han har sitt eget parti og et samlet Storbritannia i ryggen.

 

Av: Connectums utenrikskommentator Nils Morten Udgaard

Nils Morten Udgaard er tidligere utenriksredaktør i Aftenposten og har vært avisens korrespondent i London, Moskva og Bonn/Berlin. Han var statssekretær for utenrikspolitikk hos statsminister Kåre Willoch 1984-86, og professor II ved Universitetet i Bergen 1991-1997. Udgaard er utdannet statsviter fra Universitet i Oslo og har en doktorgrad fra London School of Economics.

Uansett hva som skjer i verden er vi der for å gi deg rådene du er best tjent med for å nå dine mål.

For rådgivning tilpasset ditt behov kontakt:

Richard Stott  90 72 27 80 / richard.stott@connectum.no
Nils-Odd Tønnevold  92 20 16 26 / nils.tonnevold@connectum.no

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