With the year drawing to a close, we asked some of our industry’s influencers to name the biggest/brightest/best ideas to come out of 2018 – be they related to financial services or have a wider societal, political or environmental focus. Their answers were as diverse as they were interesting, with some of the biggest issues the industry has faced this year being front of mind.
Managing Director, Paragem
"Artificial Intelligence is for everybody"
This is not strictly an idea for 2018, but what has emerged this year is the concept that Artificial Intelligence (AI) is for everybody. The large tech firms such as Google and Amazon are increasingly making their AI tools available as a cloud service, which means any business can take advantage of this in their operating model without requiring expertise. As compliance drives administration costs ever upwards in advice, innovation is the solution. There are several clever innovations already in the Australian market which leverage AI and provide the ability for advisers and licensees to deliver quality, fee for service advice to consumers, at scale. This will be transformative in a very positive way for many advice practices.
Senior Managing Director - US, QIC
"The Royal Commission"
The biggest issue to come out of this year is clearly the Royal Commission and the impact it has had on the consumer’s/members view of our industry. Clearly winning back trust will be critical.
The problem is that currently, while we are looking to regain that trust, the short-term investment returns for the members, given what is occurring in the equity market in the current year, will create further doubts in their minds about their fund. Whilst this can be easily explained given markets etc, to the average member this won’t be so easily explained.
The only other issue I continue to observe is the increasing need for pension funds in Oz to continue looking offshore for investment opportunities and returns. While Australia has been a great place to invest, due to the tax and imputation benefits, the lack of investment opportunities due to the size of our markets, and the fact that governments look less likely to privatise assets, will continue to force our asset owners offshore This won’t be a return seeking exercise solely but more about diversification opportunities.
Director of Consulting, Frontier
After years of taking a back seat to governance and environmental issues, the S in ESG, or social sustainability, has come into sharp focus this year. The link between the quality of an entity’s relationships with its broader network of stakeholders and its longer-term performance sustainability has been highlighted by several high profile examples in 2018 – including Facebook/Cambridge Analytica, and a number of Australian financial institutions fronting the Royal Commission. As responsible investing frameworks have evolved, many asset owners are actively seeking to better integrate social sustainability into their investment decision making. To improve the understanding of S and how investors can consider these issues, Frontier has been surveying how fund managers currently incorporate social issues into investment processes in 2018, and advocating for improvements in the consideration of social sustainability across investment portfolios.
There has been an increased focus on diversity in the investment industry in 2018 – particularly gender diversity in investment teams, as well as company senior management and boards. This is a big issue and comes at a time of a broader societal shift in the understanding of inclusion and unconscious bias. My colleague, Natasha Kronouer, has led Frontier’s research into gender diversity in investment manager teams (you can read it here), which includes analysis indicating gender diversity has improved investment outcomes for listed equity managers. At Frontier, we think investment team diversity improves investment decision making and therefore outcomes, as well as reducing risk – the risk of group think. This year we actively engaged with investment managers on this issue, and incorporated investment team diversity into our manager due diligence and rating framework.
Professional Director & Investment Specialist
"The business of the future"
The business of the future will need two engines to succeed.
One engine that operates within current protocols and continues to grow and innovate at the margin; and a second engine that will come at a problem from a different untested perspective, may not have a revenue imperative for the first 3-5 years but has the potential to be the growth engine for the future.
"Employees, growth & safety to fail"
Employees are key stakeholders and should be valued - too many companies forget that.
The importance of creating psychologically safe environments to create high functioning growth environments, to fail safely, learn from mistakes and move on!
Diversity is a great asset to solving a problem but it requires leadership/culture to effectively access its benefits. Creating a diverse team, Board etc. with no strategy or appetite to change the status quo or create a platform or framework to table or consider alternative thinking, will not reap the desired and expected benefits.
Former Olympian & BDM, ETF Securities
"Wireless translating headphones"
One of the brightest ideas to come out of 2018 is wireless translating headphones. These headphones allow 2 people from different parts of the world, who speak different languages to communicate while keeping eye contact with each other. This has great implication for both social and business interactions. A better communicating world will hopefully lead to a more peaceful and understanding world!
Author, speaker, change leader
The outflow from the Royal Commission into Banking has made it even more apparent that managers need to be trained and supported to lead themselves first. Understanding our motivations, how we respond, and how we lead is vital to creating cultures and workplaces where courageous conversations can be had. In 2018, I've seen this requirement for self-leadership move from a 'nice to have', to a 'must have'. There is now more appreciation that the technical skills that got us to a certain stage in our careers are insufficient without the human skills.
Managing Director, eInvest Australia
"Bright: Female talent"
I have been so very impressed (actually totally blown away) by the next generation of bright female talent about to enter the financial services industry. A little bit of guidance and encouragement, sprinkled with great mentors, challenging business problems and a supportive environment, has shown to me the future talent in financial services is going to be a cracker! Get involved and see it for yourself! fthree.com.au
"Bold: Tech and start-ups"
Sometimes the simplest ideas are the boldest.
I have been immersing myself in the tech and start-up sector this year and have been super impressed by what’s out there and their bold plans to change the world. One, MyLongevityApp, is bringing micro-savings to superannuation. A simple solution to nudge the world into topping up their super and engage in retirement, just by buying a coffee, visiting the supermarket or popping out to lunch. Check it out: mylongevityapp.com
(Some others not in the finance space but are seriously bold: inspacexr: Virtual Reality for architects: inspacexr.com and Fluxpower: real time payments for energy: fluxpower.io)
Immersing myself in this sector has forced me to ask, what am I doing that is this bold?
"Brilliant: Active ETFs"
A passion project of mine is to bring quality, active small caps portfolios to all Australian’s through the convenience of an active ETF, with an environmental, social and governance lens. IMPQ has been two years in the making. Understanding that in the small caps space there is much impact that can be made by engaging with companies to improve their sustainability outcomes and by doing so, their bottom line and investor outcomes as well. Kudos to the Perennial Small Caps team in bringing this brilliant idea to life.
You can find out more about the launch here: einvest.com.au/IMPQ
CEO, evolution media group & Founder, No More Practice Education
"The success of money books"
For me, the best thing to come out of 2018 was the success of money books here in Australia. Having published my first book with Wiley this year, (The Breakfast Club for 40 Somethings ) I was thrilled to see it get in the top 10 books on money in Australia for 2018 - but even more glad to see Scott Pages Barefoot Investor be the number one book in Australia for the last 18 months. People are finally waking up to the fact that they need to take ownership of their financial future. They want independent advice and know how. This is a massive opportunity for our industry to take on the role of educator first. After Royal Commission findings we all know that product needs to be last and the duty of care to client is to make sure they understand what they are signing up for.
By removing the first mover disadvantage in financial services we may get better consumer outcomes, more ethical behaviour and a more sustainable industry.