Money Management Institute (MMI) and Barron’s announced their annual industry awards recently, and I was happy to be able to kick it off with a fireside chat with SVP Arlen Oransky.
Investors are increasingly focused on using their money to make a difference, and regardless of beliefs, if companies are not working toward incorporating ESG in the way they manage money, they’ll be at a significant disadvantage. I strongly believe that in the next two to three years we won’t be talking about ESG as a subcategory of investing — it will be embedded in all that we do. Nomenclature is evolving and a framework is taking shape, which is essential to success and will help combat the claims of “green washing” that have been talked about in recent months. ESG is real and meaningful, and we must be dedicated and commit the resources to getting it right.
There have been calls of consolidation since I joined the industry in 1983, but it didn’t start to take hold until more recently. I think the question that really matters is: Is this good for clients? I believe it is. Clients are demanding more of us, including thought leadership and analytics, and we’re going beyond capabilities to focus on outcomes. The client wins in this, and I think that’s really important. For money managers to be successful, we need to be in front of what clients are demanding, and those that do it right will be fine. In addition to expanding the range of value-added services we provide, Invesco has been focused on building a broad range of capabilities that enable us to create the outcomes clients want.
Technology is rapidly advancing how product structures develop and function. I like to think of these structures more like delivery vehicles that all have a different purpose and continue to evolve. What really matters is what’s inside the vehicle and what outcome it can create for clients.
There’s no question that the pandemic advanced the use of technology, and the industry is well down the path of adopting new ways of interfacing with our clients. We couldn’t have predicted the rapid transition to working from home that has taken place around the world, but through technology we were able to quickly bring a robust engagement to our clients. At the same time, we understand the importance of engaging with our clients in person. As fiduciaries, really knowing our clients and understanding what they’re trying to accomplish is paramount to being successful.
While there are a number of challenges with cryptocurrencies, the underlying technology of blockchain is pervasive and will impact all parts of our business. Digital assets will provide opportunities for tokenization, which will democratize access to capabilities. While there is a lot of controversy with cryptocurrencies, I believe it will continue to evolve as regulation is introduced and it becomes more mainstream. I also think it’s reasonable to view crypto as a store of value, similar to gold, as it has some of those same characteristics. The bottom line is that it’s not going away, and we believe it’s important to understand the impact and opportunity it creates for clients.
Attracting top talent begins with a dedication to diversity, and it starts at the top. At Invesco, we value diversity of thought, which is fundamental to our success. Technical skill sets also transcend industry, creating a high demand. With many financial services roles now requiring those skill sets, it’s important to speak with students at colleges and universities early and educate them about the opportunities available in the wealth management industry.
There’s been phenomenal growth in the ETF market, which provided an opportunity for passive investing to rise. The reality is that you need the totality of the spectrum — cap-weighted indexes, smart beta capabilities, multi-factor capabilities, and high-conviction active. The majority of ETFs have been cap-weighted indexes, but you’re seeing more movement to smart beta and other active capabilities. I believe ETF vehicles will continue to thrive, and what’s in those vehicles will continue to broaden.
Invesco has been on the ground in China since 2003, and we view it as one of the greatest investment opportunities of our lifetime. With the two largest economies in the world, US-China relations are important. Business can be a huge catalyst for both change and better connection. As Tom Watson says, “World peace through world trade.” Business should be about building bridges between countries — not raising drawbridges and preventing the exchange of not just commerce but ideas, ideals, and mutual understanding. By its very nature, business and commerce can only influence when business and commerce are being conducted. Once you boycott, you are no longer part of the conversation. While tensions between the countries make it more difficult, we expect they’ll find a way forward in time.
The pandemic has clearly shown that employees are capable of functioning in a work-from-home model, developing deeper relationships with each other and with our clients, which has been a very positive thing. While technology was the tool that allowed us to be successful, we still believe that having a strong culture enabled us to thrive. With increased flexibility top of mind for employees, I don’t believe that we’ll go back to the 9 to 5 workdays of the past. At Invesco, we’re moving to a hybrid work/home model across our global business and focusing on ways to make employees’ time in the office more impactful. We believe this model will allow us to continue to grow our culture and support our employees, but we’re also ready to adapt if we’re not getting it right, and I believe that’s key.
Our industry continues to evolve and get stronger, all to the benefit of our clients. Technology is allowing us to deliver more customized and personalized capabilities and services, creating greater outcomes, and it’s been exciting to see this shift. I believe we need to continue to work on education and financial literacy, which is an area of continued focus for Invesco. We continue to hear stories of people investing in products they don’t understand, and, as fiduciaries, we need to challenge ourselves to be better for the benefit of our clients and try to prevent that from happening.
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