A generational shift in asset management

A generational shift in asset management

In this edition of Active Voice, we offer a vision of widespread change in the financial industry as younger generations fill its workforce and move into leadership roles. This vision was originally shared by Cathy Saunders, Head of Corporate Sustainability and Public Policy at Putnam, at the May 2022 Investment Company Institute (ICI) Leadership Summit. The financial industry will play a major role in the historic transition of wealth from the baby boomer generation, helping to shape society for decades to come. The industry’s reputation for gradual change may be on the verge of transformation.

AV: Cathy, you recently took part in a fireside chat on “NextGen Investing and Talent Trends” at the ICI Leadership Summit, with Kunal Kapoor, CEO of Morningstar, moderated by Heather Brilliant, CEO of Diamond Hill. What were some of your key messages?

CS: We keyed off an observation by Shawn Lytle, Global Head of Public Investments for Macquarie, that the industry had not yet had its “iPhone moment.” We think this kind of inflection point is coming, given the vast financial opportunities awaiting millennial and Gen Z investors and the rapidly changing nature of the American workplace.

Cerulli estimates that baby boomer households will transfer some $84 trillion to heirs and charity over the next 25 years. The ICI notes that the United States has nearly $40 trillion in private retirement assets; on current growth trends, this will grow to $169 trillion over the same period.

For the NextGen cohort, workplace 401(k) plans have been available since they started their careers, as compared with baby boomers, who were in their thirties when the U.S. initiated workplace savings plans. We are also seeing expanded coverage, with millions of workers enrolled in new state-facilitated auto-IRA savings programs — an “on-ramp” for the 401(k) system. Notwithstanding challenges around wealth inequality, student loan debt, and the high cost of housing, young American workers are looking at a substantial wave of financial growth on the horizon.

AV: In your remarks, you also noted the changing nature of the American workplace.

CS: We are experiencing an unprecedented bull market in the business of human capital. Many of the jobs, businesses, and even industries that dominate our economy today barely existed a few years ago.

For example, at Putnam Investments, we’re currently filling roles such as Manager of Digital Sales Enablement, Director of Global Business Intelligence, Director of Strategy and Analytics, Manager of Audio-Visual Engineering, Head of Corporate Sustainability, and Director of Virtual Sales. This professional skill diversification speaks to the value of a liberal arts education and of candidates that are open-minded and able to pivot to new opportunities as they arise.

AV: How does a “sense of purpose” apply to the work of asset management?

CS: The embrace of environmental, social, and governance [ESG] principles to inform investment strategy for clients, stakeholders, and employees is a good example. These principles align a business with the personal values of its associates. In terms of talent trends, we see NextGen employees and clients “curating” their workplace experience and personalizing their investment practices. This trend was accelerated by Covid-19, when we reinvented the workplace, eliminating many geographic limitations, institutionalizing flexible work hours, and developing a hybrid experience integrating office and work-from-anywhere modes to realize the advantages of each. But mostly, it’s about committing your career to a purpose. The idea that, if I do this work well, it will produce something good for the world, not just for myself. NextGen workers want to express their values and align with ideas bigger than themselves. For young workers today, aligning professional purpose and personal passion is a kind of “holy grail.”

AV: Can you give us an individual anecdote?

CS: We recently had a young associate in Putnam’s early career program who was very highly regarded. After some time in her position, she considered leaving her job and getting a graduate degree in social work. We were supportive and endorsed her applications with positive recommendations. Prior to her departure, we assigned her to a financial literacy project. She changed her plans and decided to stay — doubling down on a financial career aimed at empowering investors. As an industry, we need to demystify the investment management business and articulate its social benefit.

AV: In your remarks, you alluded to the notion of “radical collaborative leadership” in wealth and asset management. What’s that about?

CS: An excellent example is the Morgan Stanley Equity Collective, a group of 27 wealth management and asset management businesses, including Putnam Investments, that has undertaken a multiyear commitment to educate, empower, and develop the next generation of diverse leaders in finance.

To achieve this kind of corporate reinvention, you must have five things: accountability from the CEO and company operating heads; a head of diversity reporting to the CEO; transparency and communication with clients and other stakeholders; dedicated talent development; and retention strategies linked to robust community engagement. It’s a tall order, and both Putnam and the other participating organizations have work ahead to keep these efforts in motion and to measure and show progress toward their goals.

AV: It sounds like the next generation is reinventing wealth and asset management.

CS: That’s exactly what’s happening!

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