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Can listed wealth firms overcome short-term pressures?

by Danielle Levy on Jun 04, 2014 at 11:22

Can listed wealth firms overcome short-term pressures?

Wealth management is a sector undergoing profound change and sadly for listed wealth firms, this is a reality that is difficult to hide from.

Board reshuffles, technology U-turns, profit warnings and turnaround attempts across the industry have all been publicly broadcast to the market over the past few years by the listed names.

This has caused some to question whether it is a good idea that companies responsible for consumers’ long-term savings and investments should be subjected to the short-term pressures of the market and shareholders.

Daniel Pinto (pictured), Stanhope chief executive and founder of think tank New City Initiative, takes this view. He has grave concerns that CEOs of listed companies are too prejudiced by quarterly results and short-term incentivisation.

Detached leaders

He points out that some management teams of listed firms do not invest a significant proportion of their net wealth in their businesses, which means an alignment of interest is largely absent. In his view, this has contributed to declining capital expenditure, which is damaging for the real economy.

‘CEOs are no longer the captains of industry that created the industrial empires we know today.
They used to be owner-managers but today most of the CEOs are not substantial shareholders in their business,’ he said.

‘They are professionals who are incentivised by shares, but rarely invest a portion of their net wealth in the company they lead. At the level of the entire system, if you have all of these large corporations no longer managed by entrepreneurs but by administrators-in-chief you lose your urge or capacity to look to the future.’

His criticisms are not shared by others, however. Nick Hungerford, founder of Nutmeg, says listed wealth management companies do not necessarily have to bow down to short-term pressures.

10-year horizons

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