Investment Management and Stress

The fact that some people thrive on stress could be a plus if you want to work in the financial services industry. According to "The most (and least) stressful jobs in banking and finance" (efinancialcareers.com, December 31, 2015), careers that were ranked as most stressful to least stressful are as follows:

  • Investment banker;
  • Trader;
  • Risk management and compliance;
  • Wealth management/private banker;
  • Institutional sales;
  • Management consulting;
  • Private equity;
  • Equity research;
  • Fund manager; and
  • Accounting.

Interviews with recruiters and employees mentioned long hours and a lack of control over issues that create problems and demand solutions. Respondents who work in the risk management and compliance areas talked about their frustration when they call out areas in need of improvement but then "nothing is done." 

Other professionals, such as those who work in wealth management, talked about competition as being a source of stress. Making money only occurs after an advisor expends considerable effort to build a big client base but then more time is needed to prevent an aggressive peer from taking assets away.

Besides job-specific concerns, industry changes can be a source of worry if they are expected to radically transform the way business is conducted. Consider the rise of financial technology ("FinTech") or what Inc. Magazine referred to as "One of the Most Promising Industries of 2015." According to a recent Wall Street Journal article entitled "Can Robo Advisers Replace Human Financial Advisors?", assets managed without human intervention grew from $3.7 billion to $8 billion between July 2014 and July 2015. Although critics counter that robots cannot offer individualized advice about specialties such as estate planning, a reliance on automation, if substantial, will result in winners and losers.

Regulatory changes can raise stress levels too, especially if one has little latitude to adapt to a new rule at the individual level. The U.S. Department of Labor's proposed fiduciary rule is already showing up in the form of strategic corporate decisions that are moving people from one place to another. This week's announcement about a sale of MetLife's U.S. advisor unit to the Massachusetts Mutual Life Insurance Co. comes on the heels of the American International Group's decision to sell its broker-dealer unit rather than potentially incur added compliance costs. See "MetLife exits brokerage business as DOL rule looms" (Investment News, February 29, 2016).

Although not specifically mentioned in articles about stressful jobs, ERISA retirement plan fiduciaries are surely aware of their personal and professional liability exposure. Add the complexities of new legislation and economic challenges such as negative interest rates and it's not a stretch to understand why some fiduciaries might need to take a few deep breaths to relax. No doubt their public pension colleagues may need a zen moment as well.

Pension Transparency In A Digital World

Intrigued after reading "Colorado turns to Twitter to recruit pension board members" by Meaghan Kilroy (Pensions & Investments, February 23, 2015), I spent some time exploring the various social media sites for the Colorado Public Employees' Retirement Association ("PERA"). Recruiting Tweets can be found by clicking here. There is also a video at www.copera.org about "Serving as a PERA Trustee" for the $44 billion system that covers 500,000 individuals. Viewers learn about guardian-type investment oversight duties that include loyalty, prudence and care. A more traditional information sheet entitled "Serving As A PERA Trustee: Factors to Consider" describes what trustees do, their fiduciary responsibilities, the composition of the PERA board, educational requirements and typical time commitment.

Elsewhere, whether part of its blog, Twitter site, You Tube channel or main website, there are numerous pronouncements about financial performance, new investment offerings, videos about retirement planning, calculators and Town Hall meetings.

One Twitter post that particularly caught my eye linked to a February 20, 2015 news item entitled "Colorado PERA: Best Practices Leader." Besides letting readers know that the Board of Trustees had hired Milliman, Inc. to conduct a review of PERA's actuary, a hyperlink maps to the May 2014 recommendation of the Government Finance Officers Association ("GFOA") that pension plan fiduciaries "exercise prudence" in selecting and monitoring service providers such as actuaries. The cherry on top of the cake, in terms of transparency and easy access to information, comes in the form of an embedded link to the Milliman audit report as well as to the response from PERA's actuary, Cavanaugh Macdonald Consulting, LLC.

Having spent considerable time in reviewing the use of social media by retirement industry service providers and plan sponsors for several clients, I was happy to learn about the Centennial State's commitment to knowledge-sharing. While I cannot attest to the details of PERA's structure, its investment program and other elements of governance by examining internet properties alone, it does appear that this public plan sponsor is focused on regularly communicating with its participants, retirees and vendors.

Given a plethora of negative headlines about pension plans (public and corporate), shedding light on critical issues by any sponsor will likely be seen as a smart thing to do. This assumes that information provided to various constituencies is clear, accurate and helpful. A talented digital media professional can play a vital role by ensuring that a steady flow of content gets disseminated. Beyond that, he or she needs to engage with the intended target audience(s), solicit their feedback on an ongoing basis and make recommendations to a plan sponsor (or service provider) as a result. Compliance or confidentiality restrictions have to be taken into account. Avoiding complexity is another challenge that competes with the need to avoid being "too cute" and thereby coming across as trivial.  The list of "must do" tasks is long when an organization decides to craft a communications strategy that relies on new technology. Quantity is the not the same as quality and the use of social media can be counterproductive if not adopted with care.

Plan sponsors and financial service providers may have no choice but to join cyberspace colleagues as the use of services such as Twitter, LinkedIn and Facebook continue to gain popularity. See "Social Media Used By 71% Of Retirement Plan Participants, Survey Says" (Financial Advisor, September 26, 2013).

SIFMA Study Intimates Fiduciary Standard Cracks

Hot off the press, a study commissioned by the Securities Industry and Financial Markets Association ("SIFMA") questions whether a uniform fiduciary standard of care makes sense. Conducted by Oliver Wyman consultants, "Standard of Care Harmonization: Impact Assessment for SEC" (October 2010) suggests that a "one size fits all" approach for fee-based advisors and broker-dealers may force consumers to bear higher costs and/or limit their access to financial products that are distributed through broker-dealers and/or lower access "to the most affordable investment options." The authors assert that only one out of every twenty retail investors rely only on fee-based accounts. Their analysis considers three different types of investors to include "small," "affluent" and "high net worth." Researchers cite the regulatory burden on asset managers due to compliance with Europe's Markets in Financial Instruments Directive as a harbinger of things to come in the United States.

Critics of the study have raised eyebrows about the type of data collected for examination. They add that the Dodd-Frank Act does not require all of a broker-dealer's activities to be subject to an imposed fiduciary standard of care so the emphasis of this new research is misplaced. See "Advisory Industry: SIFMA Fiduciary Study Raises Lots of Questions" by Melanie Waddell, AdvisorOne, November 2, 2010.

At a time when numerous financial professionals are aggressively courting investors who seek to buoy their retirement nest eggs, how fiduciary standard of care rules are finalized will be important in numerous ways and to numerous individuals and organizations.