Americans, cars, fees & productivity

Morning! My last ‘formal’ communiqué of 2024. I’ve already posted my predictions, my family are all back under one roof, I’ve got a few more presents to buy for nieces and nephews of totally forgotten ages (I’m a cool, bombastic uncle not a remembering one), and if I didn’t have a very recent, hugely significant and desirable opportunity land on my desk last week, I’d be tucking into an early mince pie already.

The Americans are coming!

Just read a great FT article on “The relentless advance of American asset managers in Europe” which references US fund groups forcing European M&A talk/action to scale up, or exit. The US firms, e.g. BlackRock, GSAM, JPMorgan, Vanguard, “outcompete because they can spread technology and compliance cost across a larger asset base”. As they say “we have scale, capacity to grow and we’re resilient” borne out by 16% North American growth in 2023, compared with 8% in Europe and 2% in the UK. And whether all of this comes to pass, with UBS/Credit Suisse, Axa/BNP Paribas, Axa/Amundi/Natixis and Natixis/Generali all ongoing or being prepared, the strategies become clear. I’m glad to see, however, a last-minute reference to the real point of these firms, namely their clients: “The problem with most mergers in our industry is a failure to see the compelling rationale must be centred around the client…’we need to be big and pan-European to compete with the Americans’ is not enough.”

What exactly can we learn from cars?

This urge to scale is fascinating; the desire to have every possible asset management strategy and solution under one roof. I need to talk to a proper economist about the evolution of market models and whether size really is everything. I’ve often used the car industry as a guide, possibly naively, but are the M&A/alliances of Ford/Jaguar, BMW/Rover, Daimler-Benz/Chrysler, Porsche/VW etc and the demise of boutiques like Austin-Healey, Jensen, Triumph and TVR to name a few British marques, a future story for the WAM market? Add in the challenge from the electric cars like Tesla or BYD, akin to digital assets, and maybe you have the perfect market analogy for WAM to learn from. They’ve got regulations too: seat belts, crumple zones and emission limits, so they know all about paperwork and keeping clients safe. I believe car manufacturers share ‘platforms’ more than WAM firms, but I may well be wrong – answers on a postcard – and I’ll be pondering this more, of course.

Advice at a Fee

Talking about large US investment firms, Vanguard have introduced a new ￡4 monthly charge for “DIY” customers – take a look at this view from Boring Money and Damian Talks Money. Supposedly this is a purposeful nudge for those with few assets to jump the advice gap, choose Vanguard’s managed service and get some financial help. The managed service has reduced its fees at the same time, so there appears to be some merit to that story, but introducing the new fee does seem more like a cost covering exercise. I’m sure the market will soon tell us what they really think!

Productivity is the key

Last week, I had an interesting and thought-provoking debate with 3 fine, experienced WAM operations gurus to tackle the hairy Productivity & Fund Profitability questions. We crossed off the Impossible & the Impractical, and we now have a list of Possible & Merely Bloody Hard initiatives to work on. We’re deploying some AI smarts, and looking for a few more guinea-pigs, sorry beautiful clients, who would like to learn more about their firm Productivity – as always, get in touch!

Apologies, but I need to dash and get back to that tricky old opportunity I mentioned earlier. Cross fingers for me, I’ll be pitching it on Christmas Eve at this rate!

Have fun out there!

Audere est facere.