Does asset management have a purpose or is it, in Lord Turner’s terms, “socially useless”?
Sitting in front of flickering Bloomberg terminal lights, it can be hard to see any connection to the real world at all. Is the work of an asset manager simply solving a series of maths problems? Or is it an overpaid version of gambling when we talk about betting on a company or asset class? But the flickering lights represent the activity not the purpose. Purpose is what the activity seeks to achieve – why it exists. What is the purpose of asset management?
There is no commonly accepted definition of asset management’s purpose. But purpose is important – else why exist? And in an environment where companies are being challenged on their license to operate, certainly, it helps drive discussion and focus on what the industry could, and should, be doing. There are a number of excellent initiatives on the Industry’s purpose being done by I2020 and the CFA and others.
The Diversity Project felt it could contribute to this by bringing together individuals from across the industry to consider what our purpose is and to develop a way of articulating it that is authentic and particularly resonates with a diverse range of people.
So over the summer, a small roundtable was organised to see if we could provide a perspective on what the industry’s purpose is. Attendees included Dawid Konotey-Ahulu (Redington), Roger Urwin (WTW and CFA), Karen Shackleton (Pensions for Purpose), Galina Dimitrova (IA), Mark Versey (Aviva), Elizabeth Corley (Allianz), Rob Lake (Authentic Investor), Nick Spencer (Gordian Advice) and Jane Welsh (Diversity Project).
In this post, we outline the consensus view on the purpose of asset management. In future posts, we will explore other aspects of the discussion including what makes people feel purposeful in their work in the industry. To be clear, no one owns the purpose of an industry nor its articulation. This is just a first draft that we hope can add to others efforts and improve over time. We retain no copyright over this wording but simply hope that is used to support the positive promotion and purpose of the industry.
We look forward to your suggestions and thoughts in the comments: what do you think?
Purpose of Asset Management (a description for those new to the industry)
Asset management supports savers by helping to grow their wealth or to meet their requirements for income and to do so in a risk managed way.
The industry helps individuals to grow their savings to meet future financial needs such as a deposit for a new home or a pension in later life. It can also help charities grow their endowments and meet the income required for their charitable needs. It also helps large institutions, whether they are pension funds, insurance companies or sovereign wealth funds, to meet their objectives in looking after people’s financial security.
Asset management achieves these goals by allocating savers' money to investments with good future returns and prospects. As well as investing in existing businesses and assets, it also seeks out developments that need new finance - in companies, in property or in infrastructure projects - helping to provide jobs, support society and grow the economy. Asset managers seek to be good stewards of the companies they invest in.
Good stewardship involves making sure that the companies they invest in are being run properly and business risks are being managed appropriately. In particular, good stewardship ensures that companies are proactive in managing their responsibilities to the environment and society.
Some asset managers specialise in investing in opportunities to assist society and to provide the financing needed for the achievement of the UN Sustainable Development Goals. These goals include supporting society, building better transport, infrastructure and improving the environment. Asset managers support these aims through many different types of investments including those in schools, trains, hospitals, medicine, green energy and recycling.
The asset management industry also supports its own employees by providing them with rewarding and engaging careers. Given the complexity of investment markets and the wide-ranging requirements of its customers, it needs diversity of thought and perspectives if it is to be successful.