Putting Investors First

DSC_2831Each May, CFA Institute and local societies join together to create awareness around placing investors interest first. This event reminds us of why we work in this industry – to best serve our clients.  Moderator Darin Goodwiler guided panelists Jonathan Boersma, CFA, David Hershey, CFA, and Brian Thompson through a discussion on the current regulatory and ethical environment investment professionals are navigating. The panelists provided insights from CFA Institute, the SEC and consulting and investment management disciplines.

Most of the discussion covered the Department of Labor (DOL) rule and its impacts. Given the goal of DOL is to provide objective advise to investors, 93% of 1400 surveyed want the law and 51% think the law is already set up to meet this objective. Broker dealers will be impacted the greatest and it is likely that security sales will be a differentiated title from what we have known as advisors. As the DOL regulation progresses, we can expect to hear a unified message from the SEC and FINRA via social media and other communication channels.  All who give advice to clients are be held to the same standards and it was noted that CFA charterholders, candidates and members have long been held to a very high standard of loyalty, prudence and care. Due to this, no change is expected for this group.

One thing DOL won’t help with is people behaving badly. Culture and management play a role. Ethics training and regulation can help but regulation backward looking is implemented because we learn from our mistakes and play “catch-up” from innovation. Thompson commented that ethical decision making plays into awareness like yoga does into moods and breathing. Panelists felt that best practices are using GIPS and having a strong and visible Chief Compliance Officer.

This event was part of CFA Institute’s annual ethics initiative. For those wanting to practice ethics by role play in an interactive environment, please see http://cfa.is/1WTtG0G to access on-line programs offered by the CFA Institute.

 

Building My Brand: Soft Skills for Success

DSC_2838What is the difference between our social selves and professional selves and why would it ever be bad to be social? What do we need to be successful financially and professionally? Melissa Ford, a business and life coach helped us develop an outer focus leading to success and better outcomes.

DSC_2841The social self is the self that is created as we grow up. It is likely created by authority and is reactive, self-focused and needy; sometimes even to the point of being creepy. It represents the inner fear and doubt we might feel when our manager indicates they want to talk to us or when we are in a new group and want everyone to like us. Our professional aura concentrates on serving, contributing, being confident and creative. At the center of the professional self we find power, focus and energy. We are the creators of our professional selves.

So if the professional self is better for success, how do we shift to it and what should we be aware of? It is a doing versus being problem. Tips that can help us get into this mindset and stay there are as follows:

  1. DSC_2842Work on active listening skills. Move out of broadcast only mode.
  2. Put yourself in situations with people who are in professional mode.
  3. Work on empathy and give yourself a break. This may take time and practice.
  4. Notice how you feel and when you catch yourself in social mode, move to professional mode.
  5. Roleplay your professional self and then make adjustments based on feedback.

Melissa told us that the best thing is to just “flip the switch” and turn on the professional. We will know that we are in our professional mindset when we start overriding pre-programmed responses and we can do this easily on difficult days like Monday mornings. It’s all about getting out of the comfort zone.

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Distinguished Speaker Series: Mario Gabelli, CFA , Chairman and CEO, GAMCO Investors

Nicknamed “Super Mario” by financial media pundits, Mario Gabelli, CFA , Chairman and Chief Executive Officer of GAMCO Investors, Inc., presented his ideas on shareholder activism to a sold out crowd at the University Club on Aug. 12, 2014.

The idea that activists are catalysts was center to this Charterholder’s presentation. Teeing up that idea, he gave us insight into the philosophy and investment thesis that GAMCO follows with several quotes: “If you drink it, we follow it, and if you watch it anywhere, we follow the content”.  What and who have influenced him?  He noted Graham and Dodd and Security Analysis as being the definition of value investing and Roger Murray, his professor at Columbia Business School as having a large influence on his decision to go into investment management.  Gabelli’s unique sense of humor bubbled through as he compared Mount Rushmore to the four professors who created value investing.

Given these influences, his investment process is very similar to what Graham and Dodd taught in the 1930s.  So, what twist does Gabelli put on value investing?   He looks at private market value – intrinsic value plus a control premium with a catalyst.  Catalysts bring underlying value to the surface and include regulatory changes, industry consolidations, death of a founder, share repurchases, division sales, management succession and finally, shareholder activism.

Activist hedge funds net asset inflows were 5.3 billion in 2013 with 59% of activist objectives achieved in 2013.  Gabelli walked us through various models of shareholder activism touching on big names and big results such as Carl Ichahn, Jeff Ubben, George Hall and David Einhorn.  He pointed out that Carl Ichahn’s model works because there is demand for it.  When discussing shareholder rights and the “poison pill”, Gabelli advocated that GAMCO votes against it per their Magna Carta of shareholder rights. After all, it is all about the shareholders who own the company.

The presentation wrapped up with a discussion of companies in our own Chicagoland backyard who have either split and created value or have the potential to create value with a split.  As a final nugget of wisdom before the Q&A, Gabelli recommended The Graduate as an important movie because as you watch a young Dustin Hoffman receiving advice on what he should do with his career, you realize this is defined the attitude of people in the ‘60s or ‘70s.  What movie will define the times we are living now?