At the start of this year no-one would have guessed the coming 12 months would deliver the level of key events that 2002 has already supplied.
Of course only the very game or foolish would have made absolute predictions on what lay ahead, but even the more cautious seers would never have envisaged what has actually happened.
And if you need further proof that this year has been a roller coaster ride for the industry, take a look at the table opposite that covers industry departures since this time last year.
The list could have easily been much longer given that it does not take into account those people who changed roles within a group after a restructure or acquisition, nor does it cover the many people in less senior roles who have also left their jobs in this year’s industry shake-up.
Rather, the list is concerned with the sheer number of people who have left high profile and senior positions, for varying reasons, and, in a huge game of investment industry musical chairs, have settled elsewhere or are still looking for a new place to call their own.
The formation of such a list must, by its very nature, pose a number of questions apart from the obvious — ‘did they jump or were they pushed’ speculation surrounding some of these moves. It means there is a reason to look deeper into what is going on in the planning, research and funds management industries as well as highlighting some trends in the ongoing ebb and flow of financial services.
Long-time industry observer Tom Collins says these types of moves are not unheard of, but this round of movements has added meaning because of the rapidly changing face of the industry.
“We have seen these types of departures in 1987 and 1994 when there were severe market downturns, but this time it has been compounded by the acquisitions by the large institutions, which have resulted in additional moves out of senior roles,” Collins says.
“Despite all this, it will be interesting to see in three to four years if those purchases actually work and the institutions have made good choices in what they bought.”
From an adviser perspectiveCentrestone Wealth Managementprincipal Robert Keavney says this type of turnover is not unexpected in the industry, but he does question the impact the departures will have on some groups that have lost large numbers of key people.
“I don’t accept the premise that most funds management or planning groups work on process alone. The individuals within those groups would have been a key factor in their success and the relationships the groups have or had within the industry,” Keavney says.
It is something that researchers of managed funds groups have also identified, evident in the downgrades that a number of managers have received this year after key investment personnel announced their decision to leave.
Van Eyk Researchmanaging director Stephen van Eyk says numerous or even single key personnel changes do have an impact on the very nature of a funds management group and this is reflected by the growing number of boutiques entering the market and securing mandates.
“Large changes do have an effect on the nature of funds management groups and when people leave it can be startling because the style of the manager can shift with those coming and going over time.”
“This may not be as evident in some of the big institutions since they tend to be regarded as tried and true, but the dollars are still shifting to boutiques.”
As evidence of the growing influence of boutique managers, many are led by key people that once worked for institutions, with twice as many fund managers now as five years ago, and, van Eyk says, boutiques rated by his group have jumped from two to more than 15 in the same time frame.
“For a while the markets didn’t move with the volatility of recent years and there was a core of managers in use, but now there has been a spreading of investment dollars to more managers,” van Eyk says.
But do the growing number of managers and advisory groups in the market and the changing of the guard within many of them mean there will be an attendant lack in experience and skills?
“Those taking over from the big names will probably not have a style as flamboyant as their predecessors who made their name on picking stocks or working within a style. But with the growing size of funds under management at many groups, that can’t be done anymore and may well be suited to the style of those taking over. In fact, it probably has been a key factor in the departure of some people,” van Eyk says.
Keavney says there will be problems, but such change allows the industry to make judgements over the past actions of some of its big names.
“Almost by definition, the next generation of advisers and investment managers will not have the aggregate of experience of their predecessors and this type of turnover is typical in a downturn. However this environment provides a better ability to see who is providing value and who has been riding off the good times,” Keavney says.
“Many groups, in different forms, caught and rode the tech boom and as it all went wrong it is not unexpected to see heads roll. The industry as a whole did not justify the fees received in that bubble. Why did they get paid to buy nonsense promoted with froth and bubble?”
Despite the enormous number of people who have made the move in the last 12 months, Collins does not regard it as a bad thing from a wider industry perspective, rather comparing it to a bushfire that has cleared out the undergrowth and set the scene for a new period of re-growth.
“I feel this is a healthy thing, despite the fact the industry is almost going through a period of unprecedented change and will produce a cleaner industry compared to recent years when a degree of fat had built up over the good times,” Collin says.
“It will take time to return to normal, with some companies too seriously damaged and not able to recover yet. There will be many more opportunities, such as the development of boutiques and the creation of new investment teams as these people are not lost to the industry, just the groups they once worked for.”
