Firing lineJun 5 2019

Modernise your front office to improve adviser productivity

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Modernise your front office to improve adviser productivity

“Markets went one way, but now everyone senses that this is close to over,” says BlackRock’s head of retail for EMEA.

While Mr Gruener says BlackRock does not expect a recession in the next 24 months, he suggests the industry needs captains to help steer the big moves in the markets.

“Our clients come to us because they are looking for a solution to a problem, because they know we have many different capabilities,” he says.

Indeed, many advisers and their clients are looking for answers to market uncertainty in single products, such as asset allocation products, or, they want it in the form of advice.

Manoeuvring market uncertainty

Prior to joining BlackRock, Mr Gruener spent 10 years at Goldman Sachs in Chicago, London and Frankfurt, where he built up their fund distribution business.

“Technology was all the hype during the 1990s and I wanted to get involved because I was interested in implementing systems, such as trading systems, valuations for derivative portfolios and risk management,” he says.

“It was a fascinating time,” he continues.

“But of course when the dotcom bubble burst I knew I needed to get back to asset management and so I started working with Goldman Sachs and have been in distribution ever since.”

He notes: “I am currently in my eighth year at BlackRock, and as you usually do at BlackRock, I have done many different things.”

When asked how he plans to manoeuvre around market uncertainty over the next couple of years, he reiterates that BlackRock’s view is there will not be a recession any time soon.

He says: “However, we do think that a lot of the returns in 2019 have already happened, so what you need to be doing is building diversified portfolios, working with fund managers who are giving you more than just market direction and adding alternatives.

For example, he suggests one can do this by building a low volatility multi-asset product via an alternative product or by utilising passive instruments like exchange-traded funds to get the fee level at a client portfolio at a lower level blended base.

“But because everything starts with a client portfolio, return characteristics, risk rates and the positive impact of technology must also be a key focus of portfolio construction,” he adds.

Growth opportunities

“We know that markets are definitely becoming less one-directional,” he says.

“So to navigate this you can tilt your existing portfolio around more flexibly and for that you need input, macro opinions etc, and you need a partner like BlackRock.

“But if you don’t want to do that, you need to buy a product which is less one-directional that brings you very quickly into the alternatives conversation.”

Mr Gruener predicts alternatives will in the future become a much bigger part of portfolios than they are today.

“So what we are focusing on is alternatives, ETFs and technology,” he reiterates.

“The alternatives conversation is a highly relevant one, especially if you do not believe that the markets are going to be going up forever,”he says.

“Then there is also the illiquid alternatives conversation; historically, this only included ultra-high net worth clients in an institutional conversation, because there were not the right wrappers around to allow cross-listing of illiquid alternatives,” he explains.

“But that has now changed with a number of products,” he adds.

Changing marketplace

Another thing that has changed is sustainability and its role within the investment world.

Mr Gruener explains: “Two years ago I would have told you there is a lot of noise regarding sustainable investing, and environmental, social and corporate governance, but that nothing is actually happening.

“But now it is really happening, within BlackRock and our distributors,” he says.

“It may not be happening everywhere, and at the same speed, but sustainability is a huge topic.” 

However, he says sustainable investing does not always mean buying into a green company.

It means your investment process is considering sustainability as one element of the investment process – it is not separate, he says.

He continues: “We call it sustainable integration; it is a different lens, with more databases to understand the ESG scores of different companies or a given bond, and that investment case will also have to consider sustainability as an investment criterion.

“We are in the middle of that at BlackRock, and I think five years from now sustainable and ethical investing won’t be something special, it will just be table stakes because everyone will have to consider it, because societies want us to consider it.”

And, of course, because of Mifid II, the Retail Distribution Review, and other European wide regulations, Mr Gruener suggests the industry needs technology now more than ever.

“Productivity can be gained back by introducing more technology,” he says. “If you are not modernising your technology in the front office for the adviser, the advisers are simply not going to be able to do as much.”

Victoria Ticha is a features writer at Financial Adviser and FTAdviser.com