The Conflict Betwixt Managing Funds As Well As Selling Funds
BT Commonwealth of Australia - earlier it was purchased past times Principal Financial Group for AUD2.1 billion - was the dominant independent fund managing director inwards Australia. Its seat seemingly secured past times a really proficient (albeit aging) tape of funds management too an unbeatable sales force. That $2.1 billion was paid inwards the tertiary quarter of 1999.
And too then it all went wrong.
The bellwether for a spectacular spend upwards was the launch of the TIME fund. TIME stood for Technology, Internet, Media too Entertainment. The launch engagement I believe was fourteen March 2000, the exact engagement the NASDAQ peaked. Here is an article from May 2000 expecting 15-20 per centum annual returns.
It did non run out quite that well.
As the 2003 Form 10K for Principal says:
Westpac afterwards largely shut the funds management business office of the business.
In 3 years the trouble concern was largely destroyed along amongst the career too reputation of the too then Principal CEO.
The "retrospectoscope"* is a fine musical instrument - but it is yet obvious what happened. BT launched a tech fund at the superlative of the dot-com nail because it was slow to sell. They set "sexy" dot-com stocks inwards their portfolio because they made the production easier to sell. And they burnt their clients beyond a cinder of recognition.
Pretty it was not.
They did it because they got led past times their sales force. If yous practise what the sales strength wants too yous convey a competent sales strength yous volition sell lots of funds. As a funds management trouble concern yous volition live on large too profitable.
But the target for BT Funds Management's sales strength was a fiscal planner inwards Doncaster (10 miles from Melbourne) amongst gold-rim glasses (or the same inwards Parramatta or whatever other middle suburban Australian center). These guys are the modern bell-boys. Whey they are putting their clients into tech stocks in that location is nobody left to sell to.
And hence it is - the most extreme illustration I convey ever seen of the conflict betwixt managing coin too selling funds management products.
Imagine the patter
I want I had a recording of a BT "sales call" from tell Apr 2000. The marketplace was off pretty difficult - but all was OK inwards the fiscal planner inwards Doncaster. Economic increment looked great. The tape for the NASDAQ measured inwards Australian dollars was astounding - non solely because the NASDAQ was astounding but the AUD had collapsed to below 50c inwards the dollar.
The icon projected would convey been competence, technical sophistication too certainty.
About this fourth dimension I ran into David Drury, too then CEO of Principal at a CSFB insurance conference inwards New York. He constitute out I was Australian too regaled a circled crowd amongst his version of the BT mid-2000 spin. BT Funds Management was a really fine asset. Later I told 2 of the people inwards the circle that I thought the acquisition would toll him his career - but I did non convey the courage to enjoin Mr Drury himself. In my retentivity I similar to tyke myself I did convey that courage - but whilst I had that see I was racked amongst dubiety nearly it. Mr Drury was an of import human being amongst an illustrious career, BT had a neat reputation too I was simply a junior analyst.
Mr Drury was a amend salesman than I volition ever be. He projected the illusion of certainty. [See here too here for a word nearly that illusion...]
Good spin versus proficient funds management
What makes for proficient funds management is -
(a) contentious, but good thought through opinions,
too inwards straight contrast,
(b) dubiety sufficient to brand for certain the downside is ever good covered
This is a schizoid requirement. People who convey both these features are foreign - apartment out weird. People amongst solely (a) are engaging but dangerous.
At Bronte nosotros convey both - but solely because in that location are 2 of us. I am the contentious one. My trouble concern partner - his task is to extinguish whatever passions that I powerfulness have. [He is a existent spoilsport - ed.]
How to deal fiscal production salesmen
Influenza A virus subtype H5N1 proficient fiscal production salesman knows things that a fund managing director can't know. He knows for lawsuit what is going through the heed of that fiscal planner amongst gold-rimmed glasses inwards Doncaster. He knows what volition sell.
At best he knows how to arts and crafts the message so that it volition sell, hence that it volition non trigger whatever red-flags, hence that it volition brand the recipient comfortable.
And that is good, yous tin tell things inwards a drinking glass half-empty agency or drinking glass one-half amount agency without bending the truth. Trivial example: risks are a bad thing, so focusing on the the risks does non sell your production whereas adventure management is a proficient affair hence focusing on that powerfulness assist yous sell. You can't genuinely practise proficient adventure management unless yous focus on risks - but the angst that gives a proficient fund managing director demand non live on seen past times clients. Influenza A virus subtype H5N1 proficient salesman volition cover that angst because - good - what sells is the illusion of certainty.
But a salesman who drives changes inwards the production because, hence changed, the production volition sell amend is on the path that eventually destroyed both BT too Mr Drury's career. And proficient sales people are empathetic to the needs too desires of their targets hence that is the path they tread...
But it is a unsafe path. Really dangerous.
I know (and respect) a fund managing director amongst a really harsh solution to this. When the salesman tells him how to pattern his production he gives him a warning. The 2nd fourth dimension he fires him.
He has gone through a few sales people. And eventually he sold lots of production because the functioning was also proficient to ignore.
But it is harsh, unpleasant too non really effective every bit a sales strategy.
Anyone got a amend idea?
John
*Retrospectoscope is - to my knowledge - a Trade Mark of Platinum Asset Management - a really fine trouble solid who took over BT's dominant Australian position.
And too then it all went wrong.
The bellwether for a spectacular spend upwards was the launch of the TIME fund. TIME stood for Technology, Internet, Media too Entertainment. The launch engagement I believe was fourteen March 2000, the exact engagement the NASDAQ peaked. Here is an article from May 2000 expecting 15-20 per centum annual returns.
It did non run out quite that well.
As the 2003 Form 10K for Principal says:
On Oct 31, 2002, nosotros sold substantially all of BT Financial Group to Westpac Banking Corporation ("Westpac") for proceeds of A$900.0 1 K one thousand Australian dollars ("A$") (U.S. $499.4 million), too hereafter contingent proceeds inwards 2004 of upwards to A$150.0 1 K one thousand (approximately United States of America of America $80.0 million). The contingent proceeds volition live on based on Westpac's hereafter success inwards growing retail funds nether management.
The determination to sell BT Financial Group was made amongst a see toward focusing our resources, executing on meat strategic priorities too coming together shareholder expectations. Changing marketplace dynamics since our acquisition of BT Financial Group, including manufacture consolidation, led us to conclude that the interests of The Principal shareholders, BT Financial Group clients too staff would live on best served nether Westpac's ownership.
Westpac afterwards largely shut the funds management business office of the business.
In 3 years the trouble concern was largely destroyed along amongst the career too reputation of the too then Principal CEO.
The "retrospectoscope"* is a fine musical instrument - but it is yet obvious what happened. BT launched a tech fund at the superlative of the dot-com nail because it was slow to sell. They set "sexy" dot-com stocks inwards their portfolio because they made the production easier to sell. And they burnt their clients beyond a cinder of recognition.
Pretty it was not.
They did it because they got led past times their sales force. If yous practise what the sales strength wants too yous convey a competent sales strength yous volition sell lots of funds. As a funds management trouble concern yous volition live on large too profitable.
But the target for BT Funds Management's sales strength was a fiscal planner inwards Doncaster (10 miles from Melbourne) amongst gold-rim glasses (or the same inwards Parramatta or whatever other middle suburban Australian center). These guys are the modern bell-boys. Whey they are putting their clients into tech stocks in that location is nobody left to sell to.
And hence it is - the most extreme illustration I convey ever seen of the conflict betwixt managing coin too selling funds management products.
Imagine the patter
I want I had a recording of a BT "sales call" from tell Apr 2000. The marketplace was off pretty difficult - but all was OK inwards the fiscal planner inwards Doncaster. Economic increment looked great. The tape for the NASDAQ measured inwards Australian dollars was astounding - non solely because the NASDAQ was astounding but the AUD had collapsed to below 50c inwards the dollar.
The icon projected would convey been competence, technical sophistication too certainty.
About this fourth dimension I ran into David Drury, too then CEO of Principal at a CSFB insurance conference inwards New York. He constitute out I was Australian too regaled a circled crowd amongst his version of the BT mid-2000 spin. BT Funds Management was a really fine asset. Later I told 2 of the people inwards the circle that I thought the acquisition would toll him his career - but I did non convey the courage to enjoin Mr Drury himself. In my retentivity I similar to tyke myself I did convey that courage - but whilst I had that see I was racked amongst dubiety nearly it. Mr Drury was an of import human being amongst an illustrious career, BT had a neat reputation too I was simply a junior analyst.
Mr Drury was a amend salesman than I volition ever be. He projected the illusion of certainty. [See here too here for a word nearly that illusion...]
Good spin versus proficient funds management
What makes for proficient funds management is -
(a) contentious, but good thought through opinions,
too inwards straight contrast,
(b) dubiety sufficient to brand for certain the downside is ever good covered
This is a schizoid requirement. People who convey both these features are foreign - apartment out weird. People amongst solely (a) are engaging but dangerous.
At Bronte nosotros convey both - but solely because in that location are 2 of us. I am the contentious one. My trouble concern partner - his task is to extinguish whatever passions that I powerfulness have. [He is a existent spoilsport - ed.]
How to deal fiscal production salesmen
Influenza A virus subtype H5N1 proficient fiscal production salesman knows things that a fund managing director can't know. He knows for lawsuit what is going through the heed of that fiscal planner amongst gold-rimmed glasses inwards Doncaster. He knows what volition sell.
At best he knows how to arts and crafts the message so that it volition sell, hence that it volition non trigger whatever red-flags, hence that it volition brand the recipient comfortable.
And that is good, yous tin tell things inwards a drinking glass half-empty agency or drinking glass one-half amount agency without bending the truth. Trivial example: risks are a bad thing, so focusing on the the risks does non sell your production whereas adventure management is a proficient affair hence focusing on that powerfulness assist yous sell. You can't genuinely practise proficient adventure management unless yous focus on risks - but the angst that gives a proficient fund managing director demand non live on seen past times clients. Influenza A virus subtype H5N1 proficient salesman volition cover that angst because - good - what sells is the illusion of certainty.
But a salesman who drives changes inwards the production because, hence changed, the production volition sell amend is on the path that eventually destroyed both BT too Mr Drury's career. And proficient sales people are empathetic to the needs too desires of their targets hence that is the path they tread...
But it is a unsafe path. Really dangerous.
I know (and respect) a fund managing director amongst a really harsh solution to this. When the salesman tells him how to pattern his production he gives him a warning. The 2nd fourth dimension he fires him.
He has gone through a few sales people. And eventually he sold lots of production because the functioning was also proficient to ignore.
But it is harsh, unpleasant too non really effective every bit a sales strategy.
Anyone got a amend idea?
John
*Retrospectoscope is - to my knowledge - a Trade Mark of Platinum Asset Management - a really fine trouble solid who took over BT's dominant Australian position.
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