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Empathy is not a core skill or concept that we usually associate with investment management. It’s often viewed as a soft skill associated with the human resources or client services areas – and lately has become the leadership quality du jour.  It’s often seen as secondary to the quantitative and analytical skills normally associated with the investment profession.

This is something I’ve always found odd, considering that empathy is at the very heart of what investment managers do. The broad definition of empathy is ‘the ability to understand another person's feelings, experience…situations’. In practical terms, this means placing yourself in another person’s shoes when looking at a particular situation or problem. This could be anything from a financial conundrum to a company you are considering investing in. Empathy might sound simple. It is hard. Philosopher Henry David Thoreau described it this way: “Could a greater miracle take place than for us to look through each other’s eyes for an instant?”

Empathy might sound simple. It is hard. Philosopher Henry David Thoreau described it this way: “Could a greater miracle take place than for us to look through each other’s eyes for an instant?”

Most asset managers today never get to meet the end investors in their funds or other investment solutions. Yet, understanding these end investors’ needs and goals is essential in structuring the right solutions. How can empathy not be a key consideration for investment managers?

There is an old investment adage: if you don’t understand it, don’t invest in it. For investment managers, managing a portfolio of companies, across various industries, there really is no way you can resolutely rely on your own experience to make a sound judgement on a business as a great investment for the future, or not. To make sound judgements, investment managers need to nurture their ability to understand each of the stakeholders connected to a company and look at the business proposition through their eyes, not just their own.

Failing to recognise the inherent value of empathy leads to ignorance and hubris.  According to our head of the multi-manager investment team, Ryan Friedman, hubris as one of the biggest red flags for the team to disinvest from a fund manager. “It’s a quality with an asymmetric payoff profile, with risks that are not easily qualified,” he says.

Our firm (Investec Wealth & Investment International), started out in 1987 as a stockbroking firm. We have held direct relationships with our clients since the very beginning. A deeply personal conversation about an individual or a family’s wealth creation objectives to design the appropriate portfolio has been our way of working since the beginning. This dynamic also creates an enormous sense of accountability, simply because stockbrokers have to regularly meet with their clients to give feedback on their performance. At times, this is a deeply rewarding experience, and at others, deeply humbling. Without empathy, you can’t have humility.

A deeply personal conversation about an individual or a family’s wealth creation objectives to design the appropriate portfolio has been our way of working since the beginning.

The enormous responsibility this places on those who design and then manage a financial solution for individuals, families, trusts or businesses, can’t and shouldn’t be avoided. It is the burden and the joy that gives meaning to our craft.

While our business has evolved and grown to be more than just managing stockbroking portfolios, our founding roots have embedded a lasting, deep sense of responsibility to our clients. We are custodians of their wealth, the ones entrusted with fulfilling their financial goals – the hopes they hold close to their hearts. Over decades, it remains as clear today as much as then: the purpose of investment management is to change people’s lives.

The ability to recognise that financial aspirations mean different things to different people will be one of the defining attributes of financial services firms that will be relevant in the future. My own, perhaps sceptical view is that in building large scale solutions, the industry might have lost sight of why we do it in the first place: to change the life of the investor sitting in front of us. But I remain optimistic that, as an industry, we are getting back to understanding this fundamental reason for our existence.

For Investec’s part, we hope to leave a legacy of creating enduring wealth for the societies we live in. A part of that legacy is to raise capital for businesses to expand, grow and contribute to society broadly. As managers of our clients’ wealth, we thus have an important role to play in allocating capital in a way where both our clients and all stakeholders benefit. This, in essence, is what empathy is all about.

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Although information has been obtained from sources believed to be reliable,  Investec Wealth & Investment International (Pty) Ltd or its affiliates and/or subsidiaries (collectively “W&I”) does not warrant its completeness or accuracy. Opinions and estimates represent W&I’s view at the time of going to print and are subject to change without notice. Investments in general and, derivatives, in particular, involve numerous risks, including, among others, market risk, counterparty default risk and liquidity risk. The information contained herein is for information purposes only and readers should not rely on such information as advice in relation to a specific issue without taking financial, banking, investment or other professional advice.  W&I and/or its employees may hold a position in any securities or financial instruments mentioned herein. The information contained in this document does not constitute an offer or solicitation of investment, financial or banking services by W&I . W&I accepts no liability for any loss or damage of whatsoever nature including, but not limited to, loss of profits, goodwill or any type of financial or other pecuniary or direct or special indirect or consequential loss howsoever arising whether in negligence or for breach of contract or other duty as a result of use of the or reliance on the information contained in this document, whether authorised or not.  W&I does not make representation that the information provided is appropriate for use in all jurisdictions or by all investors or other potential clients who are therefore responsible for compliance with their applicable local laws and regulations. This document may not be reproduced in whole or in part or copies circulated without the prior written consent of W&I.


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