Danger indefinitely...
I spent an interesting couple of hours with a friend of mine this morning who has been a casualty of the melt down in the financial services market. We were chewing over some of the interesting questions about what happens with his industry after the current crisis.
From one perspective, ‘wealth management’ has been based on balancing risk with desire for above-average returns on investment. The industry has been trying to tell us that they’d ‘eliminated’ risk. Right.
So once things do get back to growth once more, will the people who have wealth to invest trust the people who had been looking after it up to now? Will what appeared safe still have that caché? Or will they completely reassess their view of risk?
Our consensus was that there is risk in anything we do, and it’s far better to understand that from the outset. As my friend pointed out, there is now definitely perceived risk in putting money into the bank – or into property. Even government bonds don’t look entirely risk free (Iceland, anyone?)
So is there a technology play that can do better?
Or are we back into trusting investment advisers’ views, based on their past track reconds? And if so, how do we address the problem that it’s almost unknown for any fund manager to remain at the top for any meaningful time horizons?
There are clearly some very bright people in that industry, but there are also a lot of people who, in my friend’s metaphor, command Premiership salaries while being Conference players.
It almost makes me glad that I don’t have the problem of having ‘wealth’ that needs management!
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