Brexit and the implications of climate change on the financial industry were high on the agenda for this year’s Association of the Luxembourg Fund Industry (ALFI) European Asset Management Conference, hosted at the Luxepo in Luxembourg on 5 and 6 March.
The theme for this year was “The 4 P’s of asset management: product, people, progress and prediction”.
One of the first panels focused on products and people and explored the impact of technology on the asset management industry. One panellist, Jan Sturesson, founder of Resting, stated technology in asset management is “not undergoing a revolution, but an evolution”, in a session discussing the impact of technology on the world of work.
Sturesson said although there is currently a technology revolution, the industry is “overeducated but underskilled, overmanaged but underlead”.
He further indicated upskilling is essential for the European workforce to excel and completely new funds are needed, but questioned: “who has the business acumen for that, what business leaders will lead us there?”
Moderator of the panel, Sigrid Nygaard Johansen, chief commercial officer at KNEIP, asked if there was resistance for this type of change.
Sturesson answered: “The leaders that will facilitate these opportunities and change will succeed. They need to think outside the box, but it’s better if they think without the box. The right kind of leadership could help people thrive and be empowered.”
James Denning, vice president of Europe for Automation Anywhere, added: “You need to differentiate that resistance between leaders and employees. We’ve seen thousands of automation platforms evolve, where companies are welcoming to technology.”
“When a business declares clearly to its employees what’s going to happen to their salary and their schedule, those transparent companies should thrive.”
Johansen also asked panellists what they thought was the number one risk to firms within the industry. Denning suggested that keeping and retaining automation engineers was the number risk.
Sturesson affirmed: “Human Resources will become Human Right skilling in the future. There will be a mission to create a new kind of CEO—chief endorphin officers.”
Johansen then asked the panellists how they would describe a “digital worker”.
In answer to this, Sturesson stated: “It’s a human being who is very bold but humble in what they do, but who understands how automation can help us [the industry] to work better and control the technology to work for humans. They should also have a clear ethical understanding.”
Denning concluded: “We should give the high repetition, rules-based and high degree of accuracy jobs to robots. Leave empathy-related roles and everything on the creative side to people.”
Later in the afternoon, there was a session on Brexit in which, according to an interactive poll, 57 percent of the audience thought that a second referendum for Brexit is likely.
In the same poll, only 18 percent of the audience thought Brexit will likely go ahead as planned, while a further 10 percent suggested they thought a delay of more than a year was probable.
The panel, made up of directors and senior counsels of international investment firms, explored how firms can make the right moves and decisions as the deadline still reamins unclear.
One panellist said: “Personally, I think the EU and UK would be better off together, but my optimistic approach is dying hard, but I hope we could see a positive outcome.”
He said, his company, an investment management group, were prudent and have prepared themselves “for any outcome”.
Brexit talks dominated the first afternoon’s discussions as the second Brexit panel of the afternoon saw Denise Voss, chairman of ALFI, discussing the future of Brexit with John Marshall, the British Ambassador to Luxembourg.
Denise Voss, chair of ALFI, asked Marshall the consequences of a no-deal or hard Brexit and what that looked like from a UK perspective.
Marshall explained: “We still have an opportunity to vote on whether we leave without a deal or not. We have been working toward a no-deal scenario for a very long time now. There are a lot of measures that have been put in place for that eventuality.”
Voss then asked what would happen “once the dust has settled” and what could be expected, post-Brexit.
Marshall said: “We want an orderly exit that is looking like December 2020. The UK wants frictionless trade, but the EU doesn’t want to undermine the customs market.”
He added, in reference to financial services, “the removal of the freedom of movement would not mean the UK will be closed to business. The government will very likely put in place a system that attracts talent so financial services can continue to grow and prosper”.
The panel then took some questions from the floor. One delegate asked Marshall why the UK Government is not in favour of a second referendum and why it is looking unlikely it will take place.
Marshall indicated: “We are very close to getting a majority of the UK Parliament to agree on a deal, with some changes to this issue of the backstop.”
“We are very close to that point.”
“There is a view shared by many that a second referendum would be a very divisive proposition.”
Toward the end of the first day, panellists discussed the struggle for the search for talent in asset management.
Ola Fadipe, head of talent for Europe, the Middle East and Africa at BlackRock, indicated: “The search for talent is not just looking for people who know big data, but the ability to make sense of data and access it at every opportunity for the right scenario.”
On the same panel, discussing the industry’s fight for talent, Martine Kerschenmeyer, senior client partner at Korn Ferry, indicated what asset management companies need is new candidates with a “sense of innovation and social commitment, with a mix of traditional skills as well as the financial know-how and a sense of the business.”
Kerschenmeyer explained that “you can have the best business strategy in the world, but without the right people, there’s no point in that strategy”.
Sinead O’Donnell, director of DO Recruitment Advisors also weighed in, highlighting a recent industry study that predicted the financial industry could be 85 million people short by 2030.
O’Donnell added: “There’s a need for people to have a stronger affinity with IT, but we mainly need operations people. In fund businesses, there now tends to be more streamlined roles.”
The moderator, Susanne Schartz, COO at SEQVOIA, asked if more agility could be a new and effective model for the current industry skill shortage.
Kerschenmeyer said: “Businesses need people with digital knowledge and agile people that are able to adapt to new environments, those who are able to upskill.”
Schartz concluded the session asking the panellists wishes or recommendations for real change.
Katharina Flechtner, chief of staff and head of business management at UBS, said: “Treat the change as not a threat but opportunity.”
The second day concentrated on progress and prediction—mainly environmental social governance (ESG) and the effects climate change could have on the financial industry.
Gabrielle Walker, a strategist for climate change, started her session by quoting the Bank of England governor, Mark Carney.
He recently said: “Climate change presents significant risks for financial services stability, liability risks and risk from transition costs.”
Walker indicated that if the Earth’s temperature rises just four degrees, this could mean losses to assets of around $4.2 trillion in present value terms.
She said: “This is not a game of compliance or ticking boxes, the urgency is real.”
However, Walker highlighted that the “fiduciary story is changing, people are starting to put climate change as one of their top priorities”.
Walker further indicated that around 17 percent of European pension funds are incorporating ESG investment into their funds, and she is hopeful that percentage will rise in the years to come.
But she affirmed what sometimes stops investors from becoming involved in doing what they can to tackle climate change is the “lack of political and regulatory drivers”.
However, she pointed out: “Companies worth a total of $7 trillion have already signed up to a voluntary task force on climate change. They see which way the wind is blowing. There are strategies to decarbonise.”
In a panel entitled ‘Impact investing in response to societal challenges’, Uli Grabenwarter, deputy director of equity investments at the European Investment Fund, commented that unfortunately there is zero pressure from stakeholders in the asset industry to react to climate change.
He said: “When we look at the impact that is needed to secure our survival, we cannot be satisfied with the impact of investing or opportunistic impact investing, we need to engineer financial products to access needed funding.”
He added: “It is [the financial industry’s] own laziness that is the problem, because we don’t have that incentive, as long as the money flows from somewhere else.”
“The value of any business going forward will be equal to the value of the solutions it brings to societal challenges. Instant transparency and accountability will make societal responsibility the most decisive factor for competitiveness.”
