David Macchia: Philipp, I know my readers will be very much interested in knowing about you on a personal level, and perhaps about things that typically do not come through in official communications. For instance, what brought Philipp Hensler to the high position he has today? From where did you come?Philipp Hensler: I think you know that I was born and raised in Zurich, Switzerland. I did all my undergraduate studies in Zurich, and obtained my graduate degree from the Fuqua School of Business at Duke University N.C. – which, I guess makes me a Blue Devil. I also am a Certified European Financial Analyst.
So much for my educational background. In terms of professional experience; before coming over to the United States, I started off my career as a junior advisor for UBS, and then quickly moved into asset management. My first position in asset management was with the traditional British private bank, Coutts & Co.
They hired me as a financial analyst to cover Continental European stocks which I did for three years. They must have liked my stock picks because they then made me the lead fund manager for their two largest equity funds; a Continental European Equity Fund and a Global Equity Fund. I was also responsible for managing their in-house pension fund which was a balanced mandate, if you will.
I did that for a couple of years, and then subsequently, I joined Scudder Investments in Switzerland. That was in 1998, a year after Zurich Insurance had bought Scudder. The mandate was to build a retail distribution network in Switzerland from scratch. When Deutsche Bank bought Scudder in 2003, I moved over to the Deutsche Bank side as the head of retail distribution for DWS Investments in Switzerland. Very shortly thereafter they promoted me to become the CEO and Country Head of all of Deutsche Bank’s asset management business in Switzerland, which is what I did for two years. In 2005, I was asked to come over here to the United States and be the CEO and Chairman of DWS Scudder Distributors Inc.
I was very fortunate to have had a working experience in all the areas that matter in the retail asset management space today: the advisory, the manufacturing and distribution of financial products. My motivation is my passion for the business and the people that I work with; as well as the constant quest to look beyond the obvious in trying to find new solutions, new ways of creating value for advisors and ultimately the shareholders of our funds.
Do you feel the U.S. experience engendered some special insights and abilities that you might not otherwise have gained?Good point, David. I think having had the opportunity of obtaining an education in two continents allowed me to gain a truly global perspective. The insights that I earned through Fuqua’s extensive Global Executive MBA program certainly prepared me for my expanded roles. Working on assignments with senior executives from around the world provided a learning environment that was unique and very rewarding. I had teammates from Singapore, Argentina, and the U.S. simultaneously working on assignments with me, while we were geographically separated.
We truly created global teams; when we had an assignment, the person in Singapore would start it off, hand it over to me in Zurich, I would send it to our team mate in Buenos Aires and he forwarded it on to the guy in Portland, Oregon. We were working on projects 24/7 which created a totally new understanding and appreciation of the power of global networks for me. I realized that by creating global networks we can leverage the expertise of individuals in remote locations and easily apply it to issues in our home market. Although managing global networks can be complex, it can most certainly provide solutions that wouldn’t be readily available to us if we constrain ourselves to the resources in the local market place.
Given that experience, I had a desire to move out of Switzerland and experience yet another culture, expand my horizon even further. The experience I’ve had here in the U.S. over the last three years has been tremendously valuable. It made me a better manager, made me understand what one has to do to thrive in a globalized world and apply that knowledge to the U.S. market.
It strikes me that the work experiences that you accumulated on two continents, in terms of your work in distribution, that perhaps that has given you a special understanding of the needs and challenges facing financial advisors and distributors. Does that strike you as being accurate?Yes, David, I’d like to think that having had executive positions in two continents helps me, but also having had the possibility to work as an advisor, an analyst, a fund manager, a sales person and now as an executive made me understand how the individual components of the service value chain of our business should work together.
We at DWS Scudder have a thorough understanding of those interdependencies which has allowed us to become very efficient in delivery of world class solutions to our clients. I personally understand what it is that advisors are faced with on a daily basis. I’ve lived it. I know what it feels like to be a fund manager, the ups and downs that you go through, and that has given me great insights into the manufacturing side of the house. Later in my career, I realized that I wanted to lead and manage people. I love the interaction with people and so while I enjoyed being a fund manager, I haven’t regretted moving to the distribution side of the business at all as it allows me to be in touch with our most important assets all the time, i.e. our clients and employees.
Given the experiences you’ve had in both Europe and the U.S., I want to ask you about the differences between European financial advisors and American financial advisors. Is there anything that immediately comes to mind in terms of how the two may be differ? Yes, I think they are coming together more and more as, again, we are living in a globalized world where there’s a certain homogenization. If I had to point to one distinctive difference between advisors in the U.S. and advisors in Europe, however, I think it would be the way investment decisions are being made. In Europe you have a very strong top down approach. The home office pretty much tells you what you can and cannot do. It’s kind of a guided architecture model if you will. Whereas the way I see it in the U.S., advisors are still the center of the decision-making process. More of a bottom up culture.
And while there is more and more influence from the home office in the U.S., there is still a high degree of independence, and a high degree of decision making power which resides with the advisor him or herself. However, I do see that the two models are more and more converging. This did strike me as a big difference when I came here to the U.S.
Differences also manifest themselves in the way mutual fund firms distribute their products. In Europe you would typically market to the home office and to the gate keepers, whereas here in the U.S., you primarily market to the individual advisor complemented by a very comprehensive research driven approach to the home offices. We understand that while we need to service and support the advisor, recommended lists and models are becoming increasingly important. Winning business there takes an institutional mind set and a new breed of key account managers. We have spent significant resources to train our people and get them professional designations that will allow them to differentiate themselves from their competitors and be a valued partner to the research folks of our most important clients.
I know that one of the areas that you’re deeply involved with is in the entire issue of U.S. retirement security, especially in terms of the boomer generation now beginning to enter the distribution phase.
Is there potential for very significant changes in the retirement-security landscape, even to the extent that large organizations can become marginalized, assuming that they can’t retool to be more relevant in the distribution phase, and also that new players could emerge that become large players, conditional upon their ability to come to market with the right kind of products, transparency, better business models? I fully agree with that, David. There is no doubt that this is one of the major trends in the industry. I think the game is changing and I believe that what pre-retirees and retirees are demanding are solutions that aren’t necessarily readily available today. I think in your questions you mentioned confidence, which I think is going to be a very important part. As an individual investor and advisor alike, you want to do business with people that you know will be around for the foreseeable future. You want to do business with an asset management firm that you know has enough substance to be around when you retire and beyond. Having the opportunity to work for Deutsche Bank’s Asset Management division, one of the largest financial services organizations in the world, with over $815 billion in assets under management globally as of December 31, 2007, provides that critical mass and level of confidence that you referred to before.
But in terms of product, David, I would re-phrase confidence or rename confidence to predictability. I think that it is probably one of the biggest catalysts for change in our industry today. It will define our approach to the challenges that we all face when it comes to retirement. The asset management industry as a whole needs to provide solutions that have a very high degree of predictability in terms of their investment outcomes. In other words investors will always prefer a portfolio which gives them the least deviation from the desired outcome, and that’s where I believe, outcome-driven products like structured notes come in.
They can provide a very specific outcome at a desired future point in time, with the lowest deviation possible. I also believe that the mutual fund industry has to create products which offer that kind of predictability.
Exactly how important are structured products to the DWS Scudder’s future?Very important. The DNA of DWS Scudder is global and innovation. I think we can support our global claim by the fact that we have more than 700 investment professionals around the world providing investment insights and recommendations for our customers. However, we need to prove to the market place that we are indeed one of the most innovative asset managers in the industry. Besides the recent innovative mutual fund launches like the DWS Life Compass funds, DWS Alternative Asset Allocation fund and the DWS Climate Change fund, we are putting a lot of emphasis on structured notes as they are an ideal tool for the next generation of investment management.
In Europe, structured products are enormously successful. Is it likely that the European experience will be duplicated in the United States? If so, how quickly will that occur?I am pretty confident that the U.S. market will quickly catch up to Europe and eventually will surpass it. Structured notes in Europe are widely accepted, even by the most conservative investors. I wish I knew how quickly this will happen. We have already seen tremendous sales growth in the monthly volumes since we started in 2006, and we are committed to improving our service model and extending our customer base rapidly. It is encouraging to see that we not only have more and more new advisors embracing structured notes, but we also see a lot of advisors coming back for more. This shows me that structured notes really offer value to advisors and their clients.
If you were right now speaking to a financial advisor who has yet to make the conversion into retirement income planning, what would you say to him or her?Don’t waste any more time. There is enough empirical evidence that there is significant money in motion looking for innovative solutions. Advisors, who embrace the new paradigm will emerge first as the leaders and gain market share. The same holds true for asset managers.
Would you talk a bit specifically about DWS Scudder’s newest products?As you know, we have just launched two new mutual funds, branded Life Compass Protect and the Life Compass Income. They provide the predictability that we talked about before in the sense that your principal is protected by a third party warranty in the case of Life Compass Protect, or the security of regular fixed distributions in the case of Life Compass Income.