Sometimes a reporter attends a session at a conference whose content ends up somewhat distant from his reader’s concerns.
What to do? Report on it anyway, and try to get readers interested in areas that are peripheral to their concerns? Or extract the insights that more targeted to the readers?
In truth, it depends on how bridgeable a particular gap is. In this case, the session at the Milken Institute Global Conference titled “Follow the Flow: How Asset Management is Reshaping the Global Financial System” appeared promising for a financial advisor audience, all of whom are interested in, well, asset management and are broadly concerned with the global financial system. The ever-popular Jeffrey Gundlach of DoubleLine Capital also seemed promising.
But in truth, the session was really by and for asset managers, as opposed to retail financial advisors, so this reporter will follow the second strategy: conveying the thoughts of intelligent and well-informed speakers made en passant — of interest to advisors.
These ideas are not part of a coherent message — since the subjects covered in the session focused on the synthetic credit market, de-equitization and SIFIs — systematically important financial institutions; all of these subjects were wrapped in coherent arguments.
Perhaps the most important insights relating to advisors came in an exchange between Gundlach and Kent Clark, who runs one of Goldman Sachs’ in-house hedge fund divisions.
Listening in on this asset manager to asset manager conversation was revealing.
Gundlach was explaining that robo-advisors are a new force increasing asset concentration in the investment industry. As money pours into these online platforms, assets are flowing increasingly into ETFs.
The reason, he argued, was that everybody says they want the same thing: “growth plus safety.” So the algorithm is sending more and more assets to the same ETFs.
Asked by the moderator to explain to a crowd of asset managers what exactly these robo-advisors are, Gundlach said:
“The financial planner industry has very wide range of delivery. A lot of … asset gathers do nothing; others are very creative. With robo-advisors, the costs are low. So the draw is the lack of overall success by human advisors at three or four times the cost of an algorithm, or spreadsheet advisor.”