Managing Director and Global Head of ETFs @ Invesco PowerShares
Dan Draper, managing director and global head of exchange-traded funds at Invesco PowerShares, believes in the power of networking. That, plus coding and general financial knowledge, is a “dynamic combination” for boosting your career.
Draper has been close to various mergers and acquisitions and has spent 17 years working abroad in Europe and Asia. His network has enabled him to join the board of two non-profits and become a fellow at the Aspen Institute.
“Keep the big picture in mind, continue to contribute and this is where all your years of networking can pay off…”
His key message is to embrace ETFs as a fintech industry and mass customisation, which will benefit everyone.
Jobs in ETFs (JE): Can you talk a little about your career path and your first job in the ETF industry?
Dan Draper: I was in wealth management and I went to UBS. At that time ETFs were fairly new in Europe, and I got to know the iShares team, which was part of Barclays back then. I ended up joining BGI iShares and helped to build out their UK and Ireland business, focusing on business development, and saw that explosive growth through the early days and the mid-2000s.
At that time, before the credit crisis, we saw huge growth in swap-based ETFs. That presented a huge advantage for us as the counterparty and tracking error risk was on the side of the swap providers, so it looked like an efficient way of doing ETFs. I then joined Lyxor and helped build out the northern European business, which was a step up. From Lyxor I was headhunted to Credit Suisse, which was then the second-biggest provider of physical replication ETFs, and I also helped to build their platform. We sold that business to BlackRock in 2013, which gave me a chance to move to the US and take over the PowerShares business. It’s a global role but based in the US. We’ve had a pretty exciting time, acquiring the Source business in Europe and more recently we announced the acquisition of the Guggenheim business.
I’ve worked at a number of different places and picked up different skills, and I feel I’ve had a global career.
JE: What tips would you give to people who want to enter the ETF industry now?
Draper: ETFs are a leading asset management product but you should also view them as part of the fintech community. Really focus earlier in your career on developing those technical skills, develop some basic coding skills and the ability to combine financial engineering with more traditional asset management training like the Chartered Financial Analyst exams. It’s a pretty dynamic combination.
As you progress, networking is crucial. ETFs are mutual funds and listed securities, and the latter category enhances the global nature of the product. Cultivating as many relationships as you can, also in the wider finance industry and the fintech space, is important, as I think we will see a convergence of data between stock exchanges and asset managers and other companies, and investors all around the world will benefit.
JE: Having seen several mergers and acquisitions, how have you learned to navigate that?
Draper: You have to understand where you are in the market cycle. When I came into the industry in the mid-2000s, it was the pioneering stage, with different companies, different ways of managing the funds and different business models and geographic focuses. We’re now in this growth phase of development and as that continues, we are seeing more competition on the pricing of ETFs and the global winners have been established. As the industry matures, that’s really where scale matters and where M&A becomes more important. I saw that at the Credit Suisse business, which we sold to BlackRock, and I got a flavor of operations and the leverage that’s embedded in an ETF business and the importance of offering full capabilities to clients.
As you get to a senior level, it’s important to understand the more strategic aspects of business, and you can learn from other industries that are in similar phases. The main thing is if you have a strong skill set and you’ve built your network, there is a huge demand for people with ETF capabilities. Just trust and believe in yourself. If you’re in the position of acquiring, that gives you a chance to focus on the culture of combining complementary businesses and enhancing that. If you’re on the other side, just continue to work hard, be professional, and if you’re talented there will always be demand for your skills. Keep the big picture in mind, continue to contribute and this is where all your years of networking can pay off. Sometimes you can be opportunistic and move to a higher level, but even if that doesn’t work out, your network can help you.
JE: Do you think working abroad is really important to build your career?
Draper: I do. In the digital age we are in now, and the availability of information, you can work anywhere. But it’s one thing to be in one location and feels you’re global in the sense that you have globally traded products and global clients, and it’s another thing to actually be there, build relationships on the ground, and understand the culture where – there’s no real replacement for that. You get to know the social customs, as well as the complexities of business, the rules and regulations, and that can be rewarding and add purpose to what you’re doing.
I’ve been very fortunate, spending 14 years in Europe and three years in Asia earlier in my career. I’m in the US now but I do very regularly lean on those understandings and that network when we make business decisions.
JE: What do you think are the biggest drivers of change for ETFs?
Draper: Since the internet was rolled out in 1994, every industry has been impacted by the digitalization of information. I think there is pressure now on intermediaries, whether we mean fund managers or retail IFAs because the information available to end clients is much greater. That doesn’t mean clients know how to use that information effectively. There is still a big need for intermediaries but the transparency of information that the internet gives has an impact on the cost of information and I think that’s where many end customers have changed their expectations for products. You really have to be value-added, and ETFs benefit from that. People know cost affects their long-term outcomes. ETFs have shifted the balance of power between customer and provider more in the former’s favor over the decades.
ETFs should remain nimble, and we’re now seeing the growth of robo investing and other asset allocation tools and services about how to use ETFs, and that area still has a high growth opportunity.
JE: What has been the greatest challenge in your career?
Draper: The word that springs to mind is purpose – finding purpose. If you’re in a career and you do well for yourself and your family, you might also want to contribute to larger society. I feel fortunate to have discovered ETFs 15 years ago and moved into this industry, as if you do well, you can also do well for society by providing great products and outcomes. I’ve come to appreciate that side of it more. Last year I became a Financial Leaders Fellow at the Aspen Institute, and I focus on bringing that sense of purpose to my clients, the people I work for and the people I work with.
In the ETF industry, I get the sense that everyone is ambitious and wants to do well, but they are also aware of that greater purpose to change the investment industry.
I’m also on the board of trustees for two non-profits. I love ETFs and financial services, but I like exploring different interests. We have a zoo in my neighborhood and my three daughters love spending time there, and now I’m on the board. It’s about giving back. You’re not only helping that organization but being on the board also brings you ideas. We had a marketing and rebranding campaign there recently. I found myself wondering if we could bring those ideas back into the ETF business.
JE: You spoke at the Inside ETFs event in Florida this month. What have you talked about?
Draper: The title is ‘The Future of the ETFs’, so we looked over the horizon. Some things I do feel passionately about include ETFs becoming more of a fintech-type industry. We’ve had a huge number of new products. Factor investing is something we’ve pioneered at PowerShares, but even beyond that, we discussed whether there are more dynamic, more efficient ways of building portfolios with ETFs as building blocks.
Now ETFs are completely established, it’s also worth discussing how ETFs become embedded in a richer client experience and give a more efficient exposure.
I’d also like to explore the theme of mass customisation. You can do fractional share buying, i.e. you can build diversified portfolios through ETFs with a relatively small amount of money. In fintech, there are direct payments and even blockchain and all of these technologies that can give us an idea of the potential of mass customisation – customers of all sizes. Institutions could only do this a decade ago, now we can all do it with technology.