Among the speakers at The Evidence-Based Investing Conference in New York City in November is Blair duQuesnay. Blair is considered one of the rising stars in the US advisory profession, and is the Chief Investment Officer at ThirtyNorth Investments in New Orleans, the city where I set out in journalism as a bright-eyed intern, quite possibly before Blair was even born! Here she looks ahead to the conference and explains why the under-representation of women in the investing industry is such a serious problem.
Which speaker are you most looking forward to listening to at The Evidence-Based Investing Conference?
There are so many great speakers and panelists on the agenda that it is difficult to pick a favourite. Bill McNabb and Jim O’Shaughnessy are two titans in the industry. I’m probably most excited about Charles Ellis. One of my mentors gave me his book, Winning the Loser’s Game, early in my career. The book was fundamental in shaping my investment philosophy. I am also looking forward to catching up with friends Jeremy Schwartz, Meb Faber, Josh Brown and Ben Carlson. And I’m hoping to meet Morgan Housel in person for the first time.
You’re on the panel for a session called Organisational Alpha (as opposed, presumably, to alpha generated by picking the best money managers). Why is it so important that advisors examine their organisational structures and work processes?
As the investment profession has progressed over the past 40 years, teams of portfolio managers replaced star (solo) managers. Process and discipline replaced ad hoc stock selection. The academic research on diversity of teams and collective intelligence is compelling. We know there are not enough women in investment management. Only 16% of CFA Charterholders are women, less than 10% of mutual managers, and less than 3% of hedge fund managers are women. I recently heard Mohammed El-Erian say that the number one solution to overcoming blindspots for his portfolio management teams at PIMCO was by adding gender diversity.
Lack of gender diversity in the industry certainly is a problem. Why do you think women are in a minority? And what can be done about it?
The CFA Institute Research Foundation shared survey data of its members with Terrance Odean, Brad Barber, and Renee Adams, who just published a fascinating paper on this very topic — Family, Values, and Women in Finance. One key hypothesis from this paper that struck me was the concept of convex compensation for time in our industry. Basically, we (as an industry) disproportionally reward those who work long and specific hours. This puts women at a disadvantage because they are socially expected and biologically required to be the caregivers of children. I also suspect, although I have not seen research to support this theory, that there is something in the messages we, as a society, send to young girls that dissuades them from choosing finance as a profession. Clearly medicine, law and accounting are making better progress than we are in recruiting women. We need to continue to research this topic and actively encourage young women to join us. I am very enthusiastic about the work the CFA Institute is doing in this area.
I notice from your Twitter posts that you like to speak your mind! Advisers often tend to be quite cautious about what they say on social media, perhaps for fear of upsetting their client base. What are your thoughts on that?
In 2016, transparency is vital. Be yourself and you will attract the right clients for your business. Authenticity builds trust, while opaqueness has the opposite effect. I have always enjoyed hearing and debating opposing points of view. Twitter is the ultimate place to engage in these kinds of discussions and debates, as long as you always treat others with respect.
Do you welcome the Fiduciary Rule recently introduced in the US? And, generally speaking, do you think it will improve investor outcomes?
I absolutely welcome the Fiduciary Rule, and I do not think it goes far enough. I realise, however, that it is not easy to get a massive ship to make a 180-degree turn. That is essentially what we need in financial services. The industry was set up to compensate for sales incentives instead of as a trusted profession, like law or medicine. At the same time, the responsibility to save and invest for retirement shifted from institutions to individuals. Individuals need professionals, not sales people, to help with the crucial process of planning for retirement. It will be expensive for large banks, wirehouses and insurance companies to completely transform their business model from sales to advice. I think the DOL made a bold, calculated, step to start this process in passing the Fiduciary rule. It’s far from perfect, but it is a vital step in the right direction.
Final question: What would you to say to someone in their 20s, who’s starting to think about investing? How should they go about it?
Start now, do not delay. Time is on a young person’s side because of the magic of compounded returns. You will need to save much less if you start today. Right-size your housing and transportation costs to fit within your means. Save at least 6 months of living expenses in a cash reserve. Simultaneously, take advantage of tax-deferred savings options such as your 401k, an HSA, or IRA. Invest in broadly diversified, low cost investment options of global stocks and bonds.
Why not come and hear Blair duQuesnay speak at The Evidence-Based Investing Conference in NYC on November 15th? To register, follow this link.