In many ways it was a case of being at the right place at the right time! What transpired was that, with the growing complexity of the financial products available, clients needed ever more advanced solutions to manage their risk exposure as well as the tax and regulatory issues they faced. As M&A activities and IPO activity grew around the end of the late 1990s, more and more wealthy individuals turned to equity derivatives to help them manage, monetise and preserve their wealth. As a result of that, my interest in wealth management expanded and grew over time.
I started my career in equity derivatives in New York and in 2005 Merrill Lynch asked me to move to London to work in their wealth management business, managing their Financial Products Group. What they wanted was someone who had product expertise in some of the more structured and complex areas to deal with the growing number of sophisticated clients and the complex solutions they were looking for. At the time, London was home to one of the most sophisticated wealth centres in the world and it was a great opportunity.
You touched on the growing complexity of the wealth management industry up until the point when you joined the division. Have you witnessed any fundamental changes to the industry since then?
Absolutely. The industry has changed substantially. In the past, private clients have traditionally opted to invest in less complex products such as equity, stocks and mutual funds. As clients have become more sophisticated, they have started to demand more intricate, holistic solutions to managing their investments. As a result, it's very difficult for a firm to approach a client with a one-dimensional solution. More often than not, you need to be able to offer a complete solution that is able to help clients manage their wealth in every aspect of their lives. Also, the process of wealth structuring [the provision of sophisticated tax solutions for individuals - dealing with wealth from a tax perspective] has become a very important part of that solution. We have a whole team at Merrill Lynch dedicated to offering wealth structuring solutions to clients as their wealth grows and their tax matters become more complicated.
How much of your role is client facing as opposed to research based? Which side of the business do you most prefer?
It's very much a combination of both disciplines. Whilst there is a lot of research and analysis involved, certainly our role requires us to build relationships with our clients and fully understand their needs and how to manage their wealth throughout their life-cycle. It is extremely difficult to recommend an investment solution or strategy to a client if we don't have a close relationship with them. For private clients, we can't provide that expertise and advise them appropriately if we don't understand their objectives. With the research capabilities of our team, we are able to enhance the client's understanding and provide clarity on developments within the markets based on the macro-economic outlook and shed more light on investment themes that they may not be aware of.
You mention the importance of your team having a sound understanding of the macro-economic environment. How much of an insight does your role allow you into the global issues going on around you?
An understanding of the macro environment is a core element of the overall investment process. The role of the Chief Investment Officer in the division is to understand the effect of the global economy on the market, and this is also true for those of us who are directly engaged in advising clients. Environmental issues will have an impact on sectors we invest in over the long term as that is where some of the opportunities are. Similarly, the fiscal injections by governments that you have seen taking place in the US and the UK will lead us to pay close attention to the stocks and sectors that stand to benefit from these policies. These are just two examples of how global macro issues directly affect the process of making informed investment decisions.
One thing I imagine might be a key factor within the wealth management industry is the issue of safety. Are clients becoming more risk averse with their money? Is it a case of safety first for clients rather than looking for high yields?
I think ideally clients are still looking for a combination of both. However, following the collapse of Lehman and Bear Stearns, clients are far more concerned about the issues of counterparty risk and credit risk. These are issues which are now at the forefront of their mind when they are looking at how to manage their wealth. Meanwhile, the recent events in the hedge fund industry surrounding Bernard Madoff have led clients to demand more transparency in their investments. Wealth preservation continues to be the number one objective of any client and they will invariably invest with firms that can provide this solution. This will always be the case, whether it's a boom year or a bear market.
What advice would you give to students with an eye on working in financial markets, especially given the difficulty of finding a job in the current climate? What skills or interests would you say are particularly valuable?
After all that has happened, the industry is no longer what it used to be and remuneration will be scaled back. So, those who choose the industry based solely on compensation are going to be disappointed.
In terms of skill-set, students might have a fixed view or preconceived notion about the kind of background required for a career in banking, but the reality is we look for individuals from many different backgrounds and interests. The main requirement is that they are well-rounded. Our team includes people with backgrounds in Maths, History, Engineering, Biology and Literature so we are not just looking for Finance majors. We have an extremely well-rounded team, and you need those diverse qualities in the people you work with. Some jobs require a particular specialism, for example, a quantitative research division will have a higher number of workers with maths PhDs. Typically, however, you will find that people's backgrounds are quite diverse.
Other qualities are also important. In particular, you should have a strong educational background. Past achievements, whether it is a sport or other extra-curricular areas are also a good indication of someone who will show a high level of commitment during their career. The one thing everyone has in common, however, at least in my team, is that they have a passion for financial markets and the enthusiasm to work in this field. This is the overriding factor and is of critical importance in establishing a successful career.