The race for the White House was on the mind of everyone who attended the opening session of the Investment Company Institute’s General Membership Meeting (#ICIGMM) at the Washington Hilton in our nation’s capital.
The featured speaker was Michael Bloomberg, whose 75 minutes on the stage with ICI President and CEO Paul Schott Stevens covered a wide range of topics – starting with Bloomberg’s career and leadership philosophy, his role as the U.N. Secretary General’s Special Envoy for Cities and Climate Change, his analysis of primary election, and his own platform if he were to run for President (but he’s not).
When asked what he would do as President to spur economic growth, Bloomberg spoke about creating U.S. jobs in industries with strong pricing power, defending big banks, and reforming education and immigration policy. He also spoke for the need for an overhaul of tax policy to support all of the above.
“What if” thinking about the current frontrunners for the White House led me to realize that, regardless of who wins in November, it is guaranteed that the policies of the next administration will have an impact on economic growth. This typically goes hand-in-hand with interest rates.
While I’m not an economist, I do know that interest rates, like economic growth, have an impact on consumers’ ability to save, borrow, and spend. Higher interest rates typically reduce consumer liquidity, which can reduce their risk appetite. But they can also increase the demand among some consumers for riskier, high-yield, short-term investment vehicles.
I wondered, “What would Mike Bloomberg do?”
Focus Products on the Needs of Your Customers
Early in his presentation, Bloomberg said, “You have to focus your product for the needs of a particular audience; you can’t be all things to all people.” Given the competing mindsets of consumers, achieving this is a tough challenge for asset managers and their firms – they’re expected to deliver good performance, maintain and improve fund profitability, and grow market share.
Bloomberg, who said, “I may not be the smartest guy in the room, but I can outwork you,” advises firms to deliver products and services that are better than any others in the market. How does he suggest doing this? By doubling down on knowing their customers, knowing their distribution channels, and then tailoring products and market messages accordingly.
Bloomberg didn’t talk directly about the regulatory environment affecting mutual funds, but I’m always thinking about it. While it is an election year, I know the structure of the SEC is designed to eliminate the possibility of partisan politics affecting regulatory policy. Mary Jo White’s term as Chair of the SEC is not due to expire until June 5, 2019. Reforms intended to help protect consumers by increasing advisors’ fee transparency, and developing systems for managing and communicating liquidity risk will likely proceed.
How can fund companies master the increasing complexity of regulatory compliance and intermediary oversight? It might be advantageous for them to think, “What would Mike Bloomberg do?”
Leveraging Technology to Manage Regulatory Pressures
During the #ICIGMM Policy Forum yesterday, the former mayor of New York City spoke about the evolution of the U.S. job market. Ours is no longer a labor economy, he said, but rather a knowledge economy. One of the markers of this change is the explosive growth of technology, “There will be more new technology in the next three years than there has been from Edison until today.” Asset managers could be harnessing technology to manage regulatory pressures. For example, new tools for automating surveillance and reporting functions can help firms work smarter, not harder.
Keep Adding Value Through Product Development
Bloomberg’s firm’s strategy is to “…keep adding value to the product – it may be expensive, but it is valuable (to the consumer).” Understanding the implications of reforms, like the DOL Fiduciary Rule, on shareholder behavior and needs, might lead firms to accelerate the overhaul and extension of product offerings that anticipate demand for efficient management, like digital portfolio-building and advice options.
One of Bloomberg’s final thoughts was, “The more you do in life, the more life you have.” #ICIGMM continues through lunchtime on Friday. For the next 36 hours, I’m going to do as much as possible to maximize my learning, networking, and enjoyment of the #ICIGMM, one of the industry’s premier conferences. I invite you to follow Boston Financial on LinkedIn and @BFClients on Twitter for updates and analysis from the conference.
Lisa Light and Gretchen Kinder contributed to this post.