Wouter Klijn is a veteran of the institutional investor space in Australia, having spent much of his 20-year editorial career working for specialist media titles including Investor Weekly and The Insto Report. We sat down to get his views on the financial services industry’s shift away from product, the positive impact of tech on journalism and how data is transforming investment management.
What issues are top of mind for your readers right now – what stories do you find they respond to the most?
Many institutional investors in Australia are in the process of insourcing asset management functions, but there are many ways to do this and so there is a great demand for insights into this process.
Another topical issue is asset owners entering into partnerships with fund managers in an effort to get more out of their interaction. But how far can you go before you give away intellectual property? Can such different organisations really align to work on common goals? As always, the devil is in the detail.
What do you think is the biggest issue in the financial services industry this year?
Without a doubt, the final report and recommendations by Commissioner Kenneth Hayne. Although he hasn’t proposed dramatic changes to the law, he has spurred regulators on to do more to enforce existing rules. I think the impact of this report will be felt for many years to come.
In the institutional area, one interesting recommendation is about the suggested separation of the role as trustee and responsible entities in super funds. He also makes some good points about governance.
How do you think financial services has changed since you’ve been a journo?
I think the biggest change has been the slow move away from a product focus to a focus on delivering services. In the adviser space this has been clearly supported by regulation, but I also see the move to partnerships in the institutional space as a sign of this transition.
Participants in various segments of the industry find that providing an off-the-shelf solution is no longer attractive and people demand more intellectual property and knowledge. I think a further digitalisation of the industry will only fuel this development.
How do you think the industry might evolve in the next few years?
Technology will drive further change, but it might take longer to play out than sometimes is expected. The impact of mobile internet has still not fully played out in how services are delivered, how people interact with companies, advisers and banks, and how new products are developed. Add to this the advances still ahead of us in machine learning and unstructured data and you can easily see that we are at the cusp of some significant changes.
As a side note, I have seen how technology has changed journalism, not just in the fall of advertising revenues, but also in the way we work. When I started, I worked on green screen computers with only access to the intranet. Now I use technology in almost every activity, whether it is research, writing, transcription, recording or editing. This has vastly boosted productivity, which also adds to the enormous amount of data out there.
What trends are you seeing amongst asset owners in terms of the types of industries and asset classes they are investing in?
Investment strategy is being transformed with the advent of factor investing. It can sometimes feel a bit hyped, but it is a much more efficient and empiric way of looking at portfolio exposures. This work will continue.
Alternative and non-financial data sets will become more important for those organisations that can afford the data and attract the talent. It is telling that these days more people want to work in data science than in finance.
What’s an issue you would like to see get more attention/coverage in industry media?
As a classically trained anthropologist I think the importance of organisational culture is still not well understood. The Hayne report touches on this: the laws are fine, but the mentality dominant in of some of the biggest culprits is not.
This is not merely a touchy-feely subject, there are some very tangible changes organisations can make here. It influences how you set remuneration incentives, it determines your policy towards staff and how you communicate with them, and it should also affect career paths in terms of promotions. As with reputation, a good culture can take years to build up but is easily destroyed.
Are we likely to see any major regulatory changes in the super space this year, given the forthcoming election and Royal Commission response?
There will always be regulatory change, but I think the real game changer is that the Royal Commission has placed the onus on the regulators to enforce the laws. They will be keen to show they have heard the message.
In terms of the elections, who knows? The short three-year election cycle seems to be more of an obstacle to get things done rather than a catalyst. I think change will be driven by global and societal forces, rather than inspired policy. But that might just be the cynic in me.