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Why small offices are currently best at clearing compliance hurdles

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Why small offices are currently best at clearing compliance hurdles

By Angel Lai Yan Young is the CEO of Harmony Advisors Limited and the former Managing Director of Goldman Sachs Asia LLC

‘There are two things inevitable in life,’ goes the old adage; ‘death and taxes’. For the modern financial professional one might add: ‘and compliance’. And, like both death and taxes, compliance isn’t just inevitable but global – jurisdictions are interlinked, policies are paired and the law, rightly, has a case to scrutinise financial dealings wherever they may be. This was a point well made just last week when Swiss giant UBS was hit by $59 million worth of fines in Hong Kong and Singapore for overcharging clients through a ten year period.

Angel Lai Yan Young

Angel Lai Yan Young

Hong Kong’s Securities and Future Commission (SFC) referred to ‘systematically overcharging,’ and said ‘UBS’s misconduct involved deception and a pervasive abuse of trust resulting in significant additional revenue for UBS to which it was not entitled.’ No one will be more perturbed by this than the bank’s own management. You don’t become one of the biggest and oldest banks in the world without championing client trust and they will be seeking to rebuild that swiftly.

However, the fact remains that this is by no means an isolated case. Two years ago Boston Consulting Group estimated compliance fines had cost banks $321 billion globally since the financial crash; it is likely now billions more. For a multitude of reasons, large financial institutions are trying but still failing to proof their operations against malpractice. In part, or in whole, this is because of the size of these organisations.

Large systems with multiple accounts will always struggle to update as fast as smaller, more nimble, setups that are already built on fully digital integrated networks. However, as the SFC made clear, the real damage at UBS was done not by antiquated systems but a systematic abuse by individual employees. I do not want to dwell on how and why this was able to happen but I do want to suggest that smaller, newer players in the financial world can win back some of the public trust that has been lost.

Here’s how:

Firstly, smaller firms are able to offer a more bespoke service in a wealth management industry becoming synonymous with the ‘advice gap’. This means if you’ve got a question over the tax exposure of your portfolio, or if you’re worried about how a policy change might impact your offshore holdings, you’ll be able to speak directly with the one person who is across all your dealing if you’re working with a small team, as opposed to going through the clunking machinations and siloed departments of a huge multinational.

This is one of the reasons I believe we will see a welcome return to the family office model. In recent years, as post recession costs, tight margins and compliance have led to service assimilation at large financial organisations, family office style finance has felt increasingly elusive – something really only for the very, very wealthy who already have such private setups in place. However, the idea of a one-stop-shop for all a family’s needs: from tax efficiency, to property advice to next generation planning, has once again become viable as the private client sector has realised it can tie up and present a united front of services for those with complex needs. For a relationship manager at an international banking marque and the family office adviser at a bespoke boutique, that presents an opportunity. So, family office services have come back into fashion but I believe it will be the smaller players who are best placed to deliver a true family office service.

The issues around compliance illustrate this point perfectly: you need to be able to react quickly and calmly to a compliance change. You need to have the information to hand and you need to be able to reassure, discuss and explain with the regulator and client as needed. If you are dealing with the combined wealth of just half a dozen families, or even just one, then that is second nature. Within a multinational financial setup a relationship manager is going to have to speak with tax departments, brokers, advisers, fund managers and lawyers across multiple offices. In a small advisory you can speak to the client, identify the most prudent route and act accordingly.

Another illustration of the importance of compliance process is in countering the cyber threat.

I don’t just mean having all the necessary digital security, firewalls and encoding in place – although that is obviously imperative. It’s also crucial to have met all the regulations around this, so that if you are hacked you don’t fall victim to a hefty fine as well.

There’s a cross over here with the advent of regtech. While watching out for nefarious cyber attacks, you also need to make sure the money you’re managing isn’t being laundered or manipulated elsewhere. Again, bringing in an agile digital setup will be in the DNA of a bespoke service office. By contrast, there’s a reason big banks continue to be the victims of data breaches, denials of service and ransomware.

This is all part of a bigger picture that has seen the pendulum of innovation within our sector swing from large firms and consolidation, back to small, new offices that are looking to make up perceived shortfalls of service. That all makes for a more dynamic marketplace – one in which we can retain and build trust and one in which the client should be the ultimate winner. That is timely as more and more people, especially in Asia, enter the High Networth bracket – and we aim to keep them there.

Regardless of the size of your firm the services you provide are going to be multifaceted and complex and that’s why compliance is so important. You aren’t just looking to prove you’re within the law, you’re looking to prove you’re a strong, safe and dextrous pair of hands.

It’s always worth having compliance at front of mind because it is the ultimate test case for your service. If a client needs to exit several large positions in multiple markets following a law change do you have the capacity to do that swiftly and without collateral loss? Are you able to really justify your one-stop-shop tag? Sometimes, a call from the regulator will give you the best answer.

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How to lead a high-performing team

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How to lead a high-performing team 1

By Matthew Emerson, Founder and Managing Director, Blackmore Four

When we think about a great team, the image we conjure up almost always includes a superstar leader.  A smiling Sir Alex Ferguson guiding Manchester United to countless domestic and European successes year after year. The conductor of an orchestra, drenched in sweat, turning to take rapturous applause from an appreciative audience.  The self-styled entrepreneur-turned-CEO who has steered their company’s share price, profit margins and brand recognition to levels of international envy.  Our bias to assign the leader credit or blame for successes or failures that are actually outcomes of a team effort is strong and widespread, and results in both positive and negative outcomes for individual leaders that often overlook any team-based root causes.

Clearly, some people are better at leading teams than others. It is quite reasonable, therefore, to try and identify the traits that distinguish effective leaders from those who consistently fail to get the best out of people they work with. Literally hundreds of research studies have attempted to see which traits predict leadership effectiveness. However, none have succeeded in identifying any set of universal traits that could reliably distinguish and predict effective leadership from the rest.

For one thing, research has shown that there is no one leadership style that works well across all situations.  A style that may be just what is needed when working with skilled and trusted colleagues to develop a team may fail badly when a newly-formed team encounters a challenging situation that requires a quick, decisive team response.

A second problem with leadership styles stems from our assumption that leader behaviour is the cause of member behaviour and team dynamics. In fact, a leader’s style may, in many circumstances, be as much a consequence of members’ behaviours as it is a cause of that behaviour.  For example, if a leader is charged with managing a team of subordinates who are both competent and cooperative, the leader is likely to be more effective responding with a considerate, participative leadership style.  However, if team members are obviously not capable in carrying out the work and, moreover, demonstrate aggression in their dealings with the leader, a much more structured, directive and autocratic style is likely to be exhibited, to varying degrees of effectiveness.  Excellent team leaders are aware of their natural styles—they know what they like to do, what they can do easily and well, and what they can accomplish.

Effective leadership

On the one hand, we tend to overattribute responsibility for collective outcomes to the team leader. Although that tendency is often exaggerated there is no doubt that what a team leader does (and doesn’t do) is highly consequential for team performance.  Instead of focusing on a leader’s generalised behaviour (style) and who they are (character, superhero), the focus should be shifted onto what it is they actually do (action).

Effective leaders focus on the four basic factors we discussed in the previous articles in this series, starting with a compelling direction and clear accountability.  The team need to know that they are a real, interdependent team and that normalised behaviours, high expectations and trusting relationships are agreed across the group.

Sometimes most of these conditions will already be in place when a team is formed and fine-tuning them will not pose much of a leadership challenge. Other times, when the focus has been on individual work not teamwork, it will take great effort to establish these four basic factors.

Behavioural leadership skills

Matthew Emerson

Matthew Emerson

Great team leaders do not rely on any single strategy for promoting high team performance. Instead, they work hard in getting all of the factors we have been discussing aligned and pulling in the same direction. However, it’s not sufficient for those who lead teams merely to know about the factors for high performance; they also need to know how to create and maintain those factors—in a word, they need to be skilled in leading teams.

Effective team leaders are skilled in executing actions that narrow the gap between what is happening in the group or its context, compared with what the leader believes should be happening.  They are also skilled at managing their emotional response, resisting the impulses of acting too quickly and dealing with one’s anxieties.

Effective leaders demonstrate their ability to tap into the collective resources and coach teams in order to exploit potential to the fullest extent.  Being able to exploit those special moments at the beginning, middle and end of task and team life cycles can prevent future breakdowns or factors that hinder high performance.

The ability to inspire others is another commonly identified, essential behavioural skill for leaders of high-performing teams.  The is no single best way to provide it, but the key is to identify which of your skills and styles can best be used to create in others the passion you feel for your work and then to hone and develop those resources as one core element in your personal repertoire of team leadership skills.

Leading high-performing teams

There is no way to “make” a team perform well, let alone sustain outstanding high performance.  Teams create their own destinies to a great extent.  After a team has launched itself on a particular path, its own actions create additional experiences which then guide members’ subsequent behaviour, which can set in motion either a cycle of ever-increasing competence and commitment or a downward spiral that ends in collective failure.

Once members have established their shared view of the world and settled into a set of behavioural routines, there is not a great deal that leaders can do to change the team’s basic direction or momentum. What leaders can do is make sure the team is set up right in the first place, action the four factors and then constantly hone and learn to develop a number of key skills specific to team leadership.

About Author:

Matthew Emerson is the Founder and Managing Director of Blackmore Four, an Essex based management consultancy working with leaders of ambitious businesses to achieve outstanding performance through periods of growth or significant change.

Starting his career at Ford Motor Company, Matthew has developed his expertise in Organisational Effectiveness in key senior HR, Organisational Development and Talent roles, predominantly in Financial Services (Credit Suisse, Barclays and DBS) and most recently as the Group Head of Talent and Performance at UBS AG.

Having worked in and across Asia for six years as well as having ‘global’ responsibility in a number of his roles, Matthew has an appreciation of international and multi-cultural working environments.  He also has a multi-sector perspective, having worked with organisations in Manufacturing, Healthcare, Education and Technology.

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Oil prices steady as lockdowns curb U.S. stimulus optimism

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Oil prices steady as lockdowns curb U.S. stimulus optimism 2

By Noah Browning

LONDON (Reuters) – Oil prices were steady on Monday as support from U.S. stimulus plans and jitters about supplies competed with worries about demand due to renewed lockdowns to prevent the coronavirus from spreading.

Brent crude futures for March rose 7 cents, or 0.1%, to $55.48 a barrel by 1210 GMT. U.S. West Texas Intermediate crude for March was up 5 cents, or 0.1%, at $52.32.

“Sentiment was buoyed by expectations for a blockbuster coronavirus relief package … (but) the tug of war between stimulus optimism and virus woes is set to continue,” said Stephen Brennock of broker PVM.

U.S. lawmakers are set to lock horns over the size of a $1.9 trillion pandemic relief package proposed by new President Joe Biden, financial stimulus that would support the economy and fuel demand.

European nations, major consumers, have imposed tough restrictions to halt the spread of the virus, while China reported a rise in new COVID-19 cases, casting a pall over demand prospects in the world’s largest energy consumer.

Barclays raised its 2021 oil price forecasts, but said rising cases in China could contribute to near-term pullbacks.

“Even though the pandemic is not yet slowing down, oil prices have good reasons to start the week with gains,” said Bjornar Tonhaugen from Rystad Energy.

Supply concerns have offered some support. Indonesia said its coast guard seized an Iranian-flagged tanker over suspected illegal fuel transfers, raising the prospect of more tensions in the oil-exporting Gulf.

“A development that always benefits prices is the market turbulence that conflicts create,” Tonhaugen added.

Libyan oil guards halted exports from several main ports in a pay dispute on Monday.

Output from Kazakhstan’s giant Tengiz field was disrupted by a power outage on Jan. 17.

(Editing by David Goodman and Edmund Blair)

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Dollar steadies; euro hurt by vaccine delays and German business morale slump

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Dollar steadies; euro hurt by vaccine delays and German business morale slump 3

By Elizabeth Howcroft

LONDON (Reuters) – The dollar steadied, the euro slipped and riskier currencies remained strong on Monday, as currency markets were torn between optimism about U.S. stimulus plans, and the reality of slow vaccine rollout and the economic impact of lockdowns in Europe.

Market sentiment had turned more cautious at the end of last week as European economic data showed that lockdown restrictions to limit the spread of the virus hurt business activity, dragging stocks lower.

The safe-haven dollar declined gradually overnight, and riskier currencies strengthened. It then recovered some losses after European markets opened, and was at 90.224 against a basket of currencies at 1152 GMT, flat on the day.

On one hand, market sentiment is supported by hopes for President Joe Biden’s $1.9 trillion fiscal stimulus plans, as well as the expectation that central banks will continue to provide liquidity.

But, in Europe, the extent of the risk appetite was limited by a lack of progress in rolling out the COVID-19 vaccine as well the economic impact of lockdown measures.

German business morale slumped to a six-month low in January, surprising market participants who had expected the survey to show a rise.

“It’s very much a case of hopes for the future against the reality of the first quarter of this year which is going to still prove to be fairly troubled,” said Jeremy Stretch, head of G10 FX strategy at CIBC Capital Markets.

“For now at least, the optimism that we’re hoping for has been somewhat delayed and that has taken a little bit of steam out of the euro and just put a little bit of support back in the dollar but ultimately I think it is still a case of those high-beta commodity currencies, reflation currencies, will continue to perform well,” he said.

Analysts expect a broad dollar decline during 2021. The net speculative short position on the dollar grew to its largest in ten years in the week to Jan. 19, according to weekly futures data from CFTC released on Friday.

The U.S. Federal Reserve meets on Wednesday and Fed Chair Jerome Powell is expected to signal that he has no plans to wind back the Fed’s massive stimulus any time soon – news which could push the dollar down further.

“The process of tapering QE is likely to be a gradual process which could last throughout 2022, and then potentially be followed by the first rate hikes later in 2023,” wrote MUFG currency analyst Lee Hardman.

“In these circumstances, we continue to believe that it is premature to expect the US dollar to rebound now in anticipation of policy tightening ahead, and still see scope for further weakness this year,” he said.

The euro was down around 0.1% against the dollar, at $1.2153 at 1207 GMT. At the European Central Bank meeting last week, President Christine Lagarde said the bank was closely watching the euro. The euro surged 9% last year versus the dollar and reached new two and a half year highs earlier in January.

But despite this verbal intervention, traders remain bullish on the euro, expecting the bar for a rate cut to be high.

Elsewhere, the Australian dollar, which is seen as a liquid proxy for risk, was up 0.2% at 0.7726 versus the U.S. dollar at 1208 GMT.

The New Zealand dollar was up 0.5%, while the commodity-driven Norwegian crown was up 0.2% the euro.

The safe-haven Japanese yen was flat on the day at 103.815 versus the U.S. dollar.

Graphic: USD, https://fingfx.thomsonreuters.com/gfx/mkt/qmypmyjdxpr/USD.png

(Reporting by Elizabeth Howcroft, editing by Ed Osmond and Chizu Nomiyama)

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