“I ask candidates to describe their most difficult client relationship …”

Dan Draper
Managing Director and Global Head of ETFs @ Invesco PowerShares

Dan 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. Dan believes that coding and general financial knowledge, is a “dynamic combination” for boosting your career.

Jobs in ETFs sat down with Dan at the Inside ETFs conference in Florida to talk about what he looks for in new hires and his career advice.

Jacky Tang, Head of the Portfolio Management Group and Co-Head of the Investment Strategy Group (ISG) in Asia at Goldman Sachs recently talked with us at Inside ETFs Asia/FundForum Asia which brought over 350 active and passive investors together in Hong Kong, about how the Asian ETF market differs from Europe/US, what the ETF industry needs to do to develop in Asia and giving back to society. Jacky joined Goldman Sachs in 2012 and is responsible for centralized discretionary portfolio management for ultra-high net worth and institutional clients across Asia.

“we will see momentum in Asia in terms of adoption of ETFs versus mutual funds as a broad trend going forward”

Jobs in ETFs (JiE): Tell us about your career path as Head of Portfolio Management Group in Asia at Goldman Sachs Private Wealth Management and the core values that helped you get to where you are today.

Jacky Tang (JT):  I joined Goldman Sachs seven years ago as part of the Investment Strategy Group under the Private Wealth Management business. The Investment Strategy Group focuses on advising clients on asset allocation, especially on strategic and tactical asset allocation. 

After a few years I started to also manage both the portfolio advisory business and the discretionary portfolio management (“DPM”) business for Goldman Sachs’ private wealth clients in Asia, overseeing the portfolio construction process including the upstream asset allocation and the downstream portfolio implementation. I also help clients manage and run their portfolios on an ongoing basis.

This is my 20^th year in the finance industry, having worked on sell side research and buy side portfolio management including hedge funds. I truly enjoy what I do and this is what keeps me going. 

JiE: Are there elements of culture that attracted you to the firm and keep you there?

JT: The culture of communication between different teams, across divisions throughout the firm has impressed me the most. I have experienced working at other banks where the focus was usually on your own area and your team, making it difficult to understand the world outside your own domain. At Goldman Sachs we communicate across divisions, we know each other’s business and we are always looking for any opportunity to collaborate. Fresh ideas and new opportunities emerge when we actually connect with each other. 

JiE: Is there any challenge that stands out in your career to date? 

JT: Education is a key challenge – making sure that clients understand the best way to manage their investments. 

Educating clients on how to manage their portfolios over the long term is a gradual process. We have seen significant improvement over the past 10 years but we still have a distance to go. There’s a lot of new wealth generated in this region – new wealth meaning new clients, new mindsets and we have to continue to educate. That’s the challenge and, at the same time, an opportunity for all of us.

JiE: Can you share some insights into how the Asian ETF market differs from the European or US market?

JT: Asian clients tend to be more alpha focused in trying to time the market so they prefer single stock more than a broad based index compared to developed markets like the US or Europe. 

However, I think we will see momentum in Asia in terms of adoption of ETFs versus mutual funds as a broad trend going forward. 

The adoption of ETFs will continue to rise, both on the retail and institutional side given the increased volatility in the market since 2016.

A significant portion of our client portfolios are ETF-based. Five years ago our DPM portfolios were mainly invested in mutual funds. Now over 60 per cent of the allocation in our standard portfolio implementation is in ETFs. We also have some clients who invest their entire portfolio in ETFs.

Is there any particular challenge on the horizon for ETFs and are there things that the ETF industry needs to do differently, or more of, to be more relevant to Asian fund selectors?

JT: There are many ETFs but mainly equity ETFs, which is why I think we need more diversification. Over the past two years fixed income ETFs have been growing but we need more. Sometimes with ETFs, once you have set the mandate, there is little room for change because you are tracking an index. For fixed income you may want to have some active duration management or some active management on the credit risk. But how do we facilitate that? Should we have fixed income ETFs with the same benchmark but a different duration adjustment and credit adjustment so that investors have the opportunity to make use of the same underlying benchmark ETF, but with a variety of different duration and credits for us to modify? If we are actively managing fixed income portfolios, we can do this easily, but in managing a fixed income ETF, it is very hard to achieve.

The variety of ETFs needs to be improved. Not only within fixed income, but also among different asset classes such as equity, hedge funds, and commodities. There are a lot of options to work on.

JiE: Does the daily drama of international reality TV and Twitter politics make the role of the investment strategist any easier (like you get to see it play out as if you were the room), or is it more difficult (there are unpredictable twists and turns daily and sometimes hourly)? Or is it just noise to filter out?

JT: As an investment manager you always want to know the trends and make the right investment decisions. The more information you have, the more work you have to do to process the information. It depends very much on the manager’s skills to analyse this information and identify if it is useful or not.

JiE: How do you stay happy, positive and mentally fit for work – any secrets you can share?

JT: Really enjoy what you’re doing – that’s the secret for me. There will always be ups and downs but if you enjoy what you are doing, if you enjoy the process, you will stay motivated even through the tough times. 

JiE: What is work life balance for you and are you able to achieve this or how do you try to achieve it?

JT: I go to the gym every other day just to make sure that I disconnect from work. I also spend time doing something to clear my mind – listening to music is great. I encourage my team and remind myself to be balanced and have a clear mind.

JiE: Beyond Goldman Sachs you have a busy life. You’re a professor at City University of Hong Kong and founder of both the Chi Mei Children Education Fund and Esgonomics.

JT: I’ve been in this industry for almost 20 years and really want to give back to society, to the community, by helping those who are in need. I spend a lot of time doing community service, including the work with Chi Mei Children Education Fund.

I also want to pass on the knowledge gained in my work and through my Ph.D. to some of the younger generation, so that is why I became a professor at university – like a knowledge transfer!

I have received a lot during my 20 years in the industry and I feel it’s important to give back.

“Coronavirus is a black swan event but investors should make investment decisions based on empirical evidence as opposed to forecasting. Keep your long term strategic asset allocation hat on and focus on risk-adjusted returns, after-tax, and after-inflation returns. Try to not get emotional over daily price action. It will cloud your judgement.”

Jobs in ETFs (JiE): Can you share your views on current affairs particularly the coronavirus and how they might be impacting the market?

John Davi (JD): First, I’ll take a step back to explain our investment philosophy and the pillars that govern our investment process. We believe in trying to generate attractive risk-adjusted returns on an after-tax and after-inflation basis. Those three pillars – after-tax, after-inflation and risk-adjusted returns are very important. Not many firms focus on all 3.

The technology sector was up 50% last year and you could have made the argument to buy technology stocks. Investors would have generated a very high return, but when you incorporate the risk of technology stocks from a standard deviation, valuation, and positioning standpoint, it might not look as attractive on a risk-adjusted basis. In terms of inflation, whether you look at core PCE or CPI, inflation is running between 1.7% to 2% (and there are other measures showing it above 2%). A 2% inflation drag really impacts your portfolio returns if you have a long-time horizon.  After-tax returns is crucial. We are big proponents of tax loss harvesting.

Our investment decisions are based on empirical evidence using datasets that ideally go back 50-75 years. We use quite a bit of factor based ETFs in our portfolios as the research clearly shows that historically you have been able to get higher up on the efficient frontier when harvesting a portfolio of factors over the long run. We utilize numerous portfolio construction tools and risk models to ensure we are getting the desired outcome we want to achieve. 

Before I get into the coronavirus, think again about our pillars – we’re long term strategic asset allocators focusing on after-tax, after-inflation, and risk-adjusted returns. We have a 5-step portfolio construction process. Step 1 is defining the goal for the end client which usually translates into one of two things – a desire for growth or a desire for income. As part of Step 1 we ask the advisor if we need to hedge the upside. In short, Step 1 tells us how much equity we should be putting in the portfolio. Step 2 is defining how much risk the advisor will allow us to take. Is 1% tracking error acceptable? How about 2-3%? The answer will dictate whether we need to stick with low cost cheap beta ETFs or if we can utilize ETFs that have higher active share as well as alternatives. Step 3 is determining where we are in the economic cycle. We look at valuations, equity risk premiums, and inflation among other things. Step 4 considers which factors have historically worked at different points of the economic cycle. As mentioned previously, we believe that harvesting a portfolio of factors can generate a better investment experience. Step 4 is crucial because we’ll apply modest factor tilts to the portfolio. Quality is something that we have been advocating and made a tilt to the portfolio 18 – 24 months ago. Step 5 is where we have an edge. Here we will load ETFs into a portfolio risk model to determine how much risk we are taking, analyze if we are getting all the right factor exposures, and ensure each of the ETFs are delivering on what they say they’re trying to do.

JiE: As a long-term strategic asset allocator, how and when do you decide whether to use ETFs, mutual funds, futures, shares etc?

JD: We believe ETFs are the ideal construct for wealth management solutions. They are generally low cost and tax efficient as they don’t typically generate capital gains compared to mutual funds. Futures are leveraged strategies and we shy away from leverage. Stocks are already levered instruments, so we don’t need to add more leverage. 

JiE: Non-transparent or periodically disclosed ETFs are very topical at the moment. When and how would you consider using those?

JD: We have produced hundreds of pages of documentation explaining our investment process, our macro-economic views, and why we choose each of our ETFs. This research is all available on our website astoriaadvisors.com. We pride ourselves on being very transparent so owning a non-transparent ETF defeats a crucial element of our value proposition. I understand why mutual fund companies prefer not to disclose their holdings, but it just doesn’t work for us as an investment process discipline. Hence, we don’t envision utilizing them.

JiE: Any thoughts on ESG and ESG development?

JD: ESG is still a very small piece of the assets in the ETF ecosystem. Obviously the assets are much bigger in the mutual fund and the separately managed account space. We’re currently doing research to determine whether ESG has similar portfolio risk characteristics to the quality factor, which I believe that it may have. Companies that exhibit good high quality – high ROE, high ROA, and low financial leverage is a good management discipline to begin with. I’m concerned ESG might be one big quality filter.

Clearly a lot more research is needed on ESG. Just taking an obvious example – you can find Exxon Mobile in one of the ESG ETFs which seems counter intuitive. Investors should utilize portfolio construction tools to ensure they are receiving the desired exposure. Our portfolios consist of more factor-based ETFs, looking at long dated risk premiums that have 50 – 75 years’ worth of underlying data. ESG is a relatively new phenomenon and though we’re not opposed to it, we haven’t utilized it thus far.

JiE: You’ll be speaking at the upcoming ETFGI Global Insights Summit in New York on April 2nd. Tell us a little bit about your session.

JD: I’ll be speaking on a portfolio construction panel outlining the process by which we determine which ETF to utilize. Our edge is combining macro-economic and quantitative research and utilizing portfolio risk models.

I have over two decades of ETF ecosystem experience primarily working closely with large sophisticated institutions. I built optimized portfolios of ETFs for investors going back to the early 2000s. I’m looking forward to discussing that at the conference.

JiE: As you know, Jobs in ETFs is the World’s First ETF career platform so let me ask a career related question – what do you look for in people when hiring?

JD:  All of the employees and people involved at Astoria have very complementary skill sets along with strong institutional backgrounds. We have a very collaborative, open culture where we exchange a lot of ideas. We want people that are disciplined, eager to learn and those who are looking to advance their career. We look for problem solvers and people that have strong quantitative skills. We live in a big data world.  If you’re going to work on the investment side, it is crucial to understand how to use data and work with large data sets.

JiE: Tell us about some initiatives that you are working on for 2020.

JD: We’re very transparent in our investment process and we’re putting more of our content on our website at astoriaadvisors.com. Here you will find all our research, our bespoke custom solutions, and content. I encourage investors to continue checking our website to track what we’re doing. We have some pretty cool research projects that we’re working on and we look forward to unveiling them in the future. 

JiE: Anything that we should be thinking about for 2020?

JD: It’s worth reflecting on the coronavirus. Nearly all of the 2020 outlook research reports were bullish. The majority of these reports talked about more upside in the US, more upside in international markets, particularly emerging markets. Coronavirus is a black swan event but investors should make investment decisions based on empirical evidence as opposed to forecasting.

Keep your long term strategic asset allocation hat on and focus on risk-adjusted returns, after-tax, and after-inflation returns. Try to not get emotional over daily price action. It will cloud your judgement. 

I would add that the last 5 – 10 years has seen tremendous outperformance in terms of US stock and US bond outperformance. The next 5 – 10 years should look very different because capital is ultimately allocated trying to deliver the highest return per unit of risk. Look to move away from the 60/40 US stock and US bond portfolio in the future.

This is where the exchange traded fund sector is at an advantage. It is a younger, more dynamic and arguably more innovative corner of the finance world. A classic case of the ETF industry leading the way was in 2016, with the launch of the SPDR SSGA Gender Diversity Index ETF (SHE), which invested in companies that had a certain number of women at board level. The fund became the most successful fundraiser of the year. Organisations like Women In ETFs, focused on education and networking, also ensure that women in the industry can push boundaries, become leaders and inspire others to succeed.

Yet there is plenty of room for ETF-oriented firms to grow in the right direction. Are there an equal number of women at the company’s senior levels? Is there proportionate representation of people of colour, and people with disabilities? Are there chances to work remotely, part time, or in a job share? Employers should know that generations X and Y want flexibility – a recent UK-focused survey found that 92% of younger people want to work in a flexible job, yet only 11.1% of jobs paying more than £20,000 provide this opportunity.

The big questions – for example on shared parental leave, equal pay and anti-discrimination company polices – need to be asked, but the smaller issues also need to be addressed. Look at your website and your messaging – talking continuously of sport as a metaphor for team success might not send the inclusive message, whether addressing staff or clients. A mentoring scheme might help women to climb the ranks if they don’t have the same “vertical networks” as men tend to do. And certain retention schemes and incentives can encourage women to come back to work after having children.

The stats are rather poor at the moment – only 5% of Fortune 500 company CEOs are women, and the highest number has only been 32 women since the list was created in the 1950s. However, the financial world in general is definitely making progress. The Women in Finance Charter, launched in conjunction with the Treasury in the UK, has around 300 firms signed up, which are all willing to increase the number of women employees at all levels. Several government-backed initiatives, like the Hampton-Alexander review in the UK, have all set a target of 33% female representation in senior leadership by 2020. And an increasing number of social and ethically-minded ETFs will deliberately not invest in companies that do not try to do better.

That doesn’t mean we have to stop at 33%, or even 40%. Targets should be ambitious, and employers should think long and hard about how they will reach them, or risk being left behind. By taking diversity, gender, and workplace flexibility into account, those in the ETF business will be well-positioned to attract the next generation of talent, and retain current valuable employees in the process.

Jobs in ETFs caught up with Shana around the Inside ETFs conference in Florida to discuss the trends that will define the future of ETFs, challenges for the ETF industry and the need to find ways that allow women to manage their careers and ambition with motherhood.

,,I truly believe that direct indexing is a huge disrupter and not just because I manage direct index portfolios. I have experienced the demand for these products first hand. Clients are happy to have a solution that feels customized to their specific investment and tax needs.”

Jobs in ETFs (JiE): From a B.S. in Sports Management to Director of Investment Due Diligence at Orion Advisor Solutions. Tell us about your career path – not the most obvious route into the financial world.

Shana Sissel (SS): When you think about what a sports management degree involves, it’s the same core curriculum as any business degree only getting sport specific as you take the more advanced courses, but definitely not the direct route into finance.

In undergraduate school, I really believed that I would be a sideline reporter for ESPN – that was my dream. I was with the New England Sports Network for a year working with some very high-profile female reporters who went on to work in places like ESPN and NFL Network. I was convinced that was what I wanted to do and was actually offered a job working in media relations for a large NFL team but the salary at the time made it virtually impossible to be able to live and work for them.

After turning that down, I worked for a staffing agency. During my time there, my firm was approached to help find financial advisors for Morgan Stanley. After a period when none of our candidates were hired, my boss asked me to go ‘undercover’ by doing an interview to see if we could determine the reason. Ironically, I was offered a job and fell into financial services!

I realized quickly that I was not cut out to be a financial advisor but I did fall in love with the financial markets and after getting a Master’s in Business Administration from Bentley University with a focus on global financial analysis I’ve built my career to get where I am today.

JiE: Biggest challenge of your career to date and how did you navigate?

SS: It was a real challenge to get into a more analytical role as my experience was in sales but I have also had to deal with being judged on my looks, often coming across the “she can’t possibly have a brain” attitude. In addition, I hadn’t gone to what was considered a top business school so I had to scrap a bit and take an unconventional path to get where I am today.

It took me a while to get into the type of role that I wanted. I looked strategically at where I wanted to be. I figured that getting into a large organization in a sales role was the best route. I joined Fidelity as an inside wholesaler –  and built relationships with people in departments that I was interested in exploring, explaining that I wanted to do more analytical work. I spent my spare time doing analytical work, taking classes that were analytical in nature and was eventually offered a role in a more analytical type of group.

JiE: Did you get any good advice along the way?

SS: One mentor really made a difference in my career – he was and still is a portfolio manager at Fidelity – at a time when I was still on the sales desk. One of the best pieces of advice that he gave me was that no matter how much you like the organization you are with, if you are not being offered the opportunity you want, don’t be afraid to look elsewhere – don’t get stuck in a role out of loyalty. I took that to heart, moved around a bit and had a variety of different roles to get to where I am today.

JiE: What are the things you work on, what are some of the challenges that you face in your role and what do you enjoy the most?

SS: My role at Orion is three pronged. First and foremost, I’m a senior Portfolio Manager on the firm’s Direct Index Product lineup, co-managed with Horatio Carias, for our high net worth clients.

I was also recently given the opportunity to build out and lead an in-house due diligence group. Our new Investment Strategies Group will be focused on doing due diligence for the investment strategies that are available through both our Orion Communities and Orion Portfolio Solutions Turnkey Asset Management Program.

In addition, I do quite a bit of media for the firm which I really enjoy. I’m very fortunate to be a member of the Women in ETFs Speakers Bureau and Press Corp. which also has led to some incredible media and speaking opportunities. I’m comfortable in front of a camera and it makes sense to have a couple of people on the team that are good at that as we continue to grow as a firm and build our brand equity.

JiE: As a woman in this industry has that had any positive or negative impact at all?

SS: Throughout my career, I have felt that male colleagues can be a little more condescending, maybe subconsciously, because I am a woman. There have also been times where I haven’t necessarily been given opportunities based on the assumption that I would not want to do certain roles because I am a wife and mother, which couldn’t be further from the truth.

On the flip side, I’ve found ways to leverage the fact that I’m a woman to build my profile and to help build awareness for my firm. Our industry has become more focused on showing diversity which opens doors for me which might not have opened any other way.

I’m passionate about improving the gender diversity in the industry and improving visibility for women in investment management. Yes, many of the opportunities for exposure that I’ve been given in the past 2 years have been because I’m a woman but I have no issue with that at all. It was a door opener but subsequent opportunities have come from the fact that I was able to provide valuable content & commentary.

JiE: How have you seen asset management change during your time in the industry and what trends will shape the future?

SS: I joined the industry in 2001 so I have seen the tech bubble bursting, 9/11, Afghanistan, the Iraq War and the financial crisis. I saw the industry excesses, firms getting in trouble for outlandish behavior with gifts & entertainment. I’ve seen the fallout from the financial crisis, the pressure on fees, competitiveness and the evolution of different types of vehicles and options out there for investors.

There have been significant events that led to changes in the industry, but where the industry has evolved the most is through the impact of technology. I think that the industry as a whole will start to see that shifting more in terms of how technology improves efficiency and ways that we can serve our clients.

JiE: What trends do you think are going to define the next few years in the ETF space?

SS: I see three key elements influencing the future of ETFs – direct indexing, continued fee pressure due to regulatory and technology innovation, and non-transparent active ETFs.

I truly believe that direct indexing is a huge disrupter and not just because I manage direct index portfolios. I have experienced the demand for these products first hand. Clients are happy to have a solution that feels customized to their specific investment and tax needs. I think we will continue to see tremendous growth in this area.

Low fees are going to weed out smaller players, especially those with no clear differentiation from the larger providers. On the flip side, I think fee pressure will really drive the creation of differentiated product offerings. We’re seeing some of that already with new entrants bringing groundbreaking ideas that are being implemented in ETF format.

The focus on non-transparent active is really going to change the game in terms of firms being more open to using ETFs as a vehicle for some of their actively managed products. I think we will see a lot of new products in the fixed income and liquid alternative space as a result.

JiE: What challenges do you see moving forward?

SS:

One of the top challenges will always be the regulatory environment. Investment management, whether ETFs or otherwise, always seem to be a target for greater regulatory pressure especially when there’s any sort of economic downturn as it’s easy to blame investment management or Wall Street for issues.

Part of the fee pressure is coming from the regulatory environment so how the industry evolves and deals with that is definitely a challenge.

Technology is a challenge – the more we use technology, the greater risk we have from a security standpoint. The more we tell our clients to use technology to provide us with data and information on their finances, the more we should be concerned about the security risk and the privacy of that information.

JiE: And if you had to give one piece of advice to the ETF industry, looking forward, what would that be?

SS: Being open to innovation and finding ways to create real differentiation is important for the ETF industry to avoid flows going into more innovative vehicles and products as is happening with mutual funds. ETFs have been a winner for decades now so avoiding complacency is key, as is embracing change.

JiE: If you had a superpower, how would you change the ETF industry?

SS: I would make due diligence of ETFs a real focus. Investors are not evaluating the entire landscape and they miss out on opportunities by narrowing in on the biggest or the most liquid products. I would love to push investors to look at ETF due diligence the same way they look at hedge fund due diligence or mutual fund due diligence.

JiE: You just spoke at Inside ETFs 2020 in Florida. Tell us a bit about your passion for liquid alternatives and what attendees took away from your session.

SS: Liquid alternatives are a passion of mine and an area where I have quite a bit of expertise. In the beginning of my career I worked for major, long only investment managers and was ‘brainwashed’ somewhat to think that alternatives were evil, secretive products that didn’t add value and just manipulated the markets.

When I had the opportunity to do hedge fund due diligence it was right at the onset of the financial crisis. My eyes were opened to all the pros and cons of alternatives, non-liquid alternatives in this case, but mostly I felt like they were misunderstood and had more value in portfolio construction than I had been led to believe. At the time, I started doing work on hedge fund replication. The firm I worked for was looking for ways to hedge our risk to managers that we couldn’t liquidate easily at the time. So, I was tasked with looking for ways that we could do that with options. I didn’t know it at the time, but I was doing hedge fund replication before that was a “thing”.

Right around that time (08/09) liquid alternatives became a buzzword. I leveraged my experience working in hedge fund due diligence to add tremendous value to a growing space. I focused on educating advisors and clients on how to use liquid alternatives as a diversifier. Even now, a decade later, there’s so much confusion as to what they are and how they should be used. So many investors write them off as not having value because they haven’t produced the kind of returns that pure equity has since the crisis. They simply don’t understand how they really can add value.

Our panel was designed for attendees to walk away with a better understanding of why they should be using alternatives and what the landscape of alternatives looks like in ETFs. Liquid alternatives can be hard to use in portfolios because there really aren’t a lot of options in the space. They do exist though and it’s an area that I believe will grow as people understand how to implement them in their portfolios.

JiE: Staying happy and positive at work – any secrets you can share?

SS: Being thankful for what you have is a big part of being happy. Making sure you take time for yourself and not getting too caught up in one thing – in my case work – is really important. The ability to say no sometimes is useful for your sanity. I also have very blue-collar roots and my family doesn’t let me get too full of myself when I’m succeeding. Staying humble and not getting too high or too low really helps.

JiE: You’re a mother managing a career. How do you pull it off and is it something that there needs to be more discussion about?

SS: We don’t talk enough about this. We don’t appreciate that the demands of our industry make motherhood hard. I have felt the stress and pressure myself of trying to juggle everything to advance my career and my family while at the same time being overlooked for opportunities based on the assumption that because I’m a mother I wouldn’t want to take certain roles (almost always its associated with travel). Depending on the person this may not necessarily be the case so we need to discuss it more openly.

Maternity leave and how that’s managed is something we should also discuss. Some parents want and need the time to disconnect completely and focus on family. Others may prefer to remain engaged at some level in work to avoid feeling completely disconnected when coming back. I felt disconnected when I came back. I needed the maternity leave but we work in a fast-moving industry and if you are gone for 6 – 12 weeks an entire market dislocation could happen and you’d miss it. Being able to feel engaged after having a baby, if that’s something you want, is important to discuss. If you look at the research that has been done, motherhood is the No. 1 cause of the dislocation between men and women in their careers. Whether in terms of rising to executive levels or the gender pay gap – we need to be able to find ways that allow women to manage their careers and ambition with motherhood.

I work very efficiently as a remote employee while at the same time it gives me the flexibility to be closer to my family. On this point, one of my close friends is a team leader at a large financial firm. She has been a key driver of an initiative there which introduced a roundtable forum to discuss women and motherhood. The focus of the roundtable is on how to keep mothers in the industry and keep them engaged. One of her mantras is that she does not need her team physically present at the office just to see their faces. If they are able to get the job done remotely then that should be on the table something that should not be exclusive to women as more men want to engage in child rearing, this is particularly true with millennial men.

More discussion is part of progressing and technology is certainly part of the solution too.

JiE: What is work-life balance for you and how do you achieve it?

SS: I don’t think that there is such a thing as work-life balance and anyone that thinks you can balance the two is delusional. You have to take your wins with your losses. There will be times where work is going to have to take priority. That’s something I’m dealing with right now. I’m going to spend the next 2 months traveling extensively and that takes me away from my family. There are also times that the project that I’m working on feels like a well-oiled machine and demands on my time are a little different so I can afford to spend a little more time with my family.

The one thing that I really focus on is self-care. It sounds cliché, but self-care is so important, whatever that means to you. Everyone’s definition of self-care is different and I do think you need to prioritize it no matter what. In order for you to be a good leader, a good employee or a good parent you need to take care of yourself. The only balance that I look for is to make sure that I keep myself centered and happy so that I can be good at the things that I need to do – it doesn’t have to be 50/50.

“I hope we’ll see increasing interest in and more thoughtful use of some of the really smart multifactor products and more strategic fixed income betas. We could see some spicy stuff in the bond ETF world. These types of products offer a really great opportunity for issuers to work with advisors and participate more in the portfolio construction and idea gathering process.”

Jobs in ETFs (JiE): From degrees in journalism and political science to investment director at WST Capital Management, tell us about your career path. 

Elizabeth Marchetti (EM): Born and raised in Jackson, Mississippi, mine has been a slightly unusual career path – you can thank Mississippi for Rock & Roll and the modern American novel but it’s not at all a hub for Financial Services and definitely not the institutional Asset Management world that I eventually ended up in.

Graduating from Boston University at 20 with political science & journalism degrees, the plan was to be a lawyer at some point, but I landed in the industry through an entry level client service admin job at Wellington a large private, global asset management firm. At the time I had little or no personal history with investing, had never taken a business class and was literally vague on the differences between a stock and a bond and knew nothing about capital markets but the Wellington approach is to find the right people for their organization and go from there. 

I fell totally in love with the industry which had a lot to do with the way Wellington looks at the world and how they approach research which was fascinating to me. My time there formed my concept of investing and problem solving and, most importantly, a belief that integrity can and must exist even at a firm of that size.

Personal circumstances prompted my next 2 moves, first to San Diego, where I joined a small cap boutique firm called Rice Hall James, starting my transition towards the investment side in a role bridging the gap between portfolio management and business development and subsequently to WST in Norfolk, Virginia. I joined in a business development role but have pretty much worn every hat over the past 4 years every front office role in both business development and investments, and become deeply involved in strategy, management and operations.

From a very random and fortunate introduction to the industry, I’ve been lucky to land at three firms that are very different in terms of focus, approach and size but where I worked under really competent, generous, leadership, benefitting from their interest in my development. 

JiE: Biggest challenge of your career to date and how did you navigate?

EM: The biggest challenge in my career has been at my current role related to learning the type of client we deal with. WST Capital Management is the tactical ETF strategists division of Wilbanks Smith & Thomas Asset Management which is an almost $4 Bn RIA where thecore business is wealth management and provision of sub advisory service for taxable clients.

At both Wellington and Rice Hall James I had worked almost exclusively with institutional clients with little or no exposure to taxable clients and literally did not understand taxes as a friction that has to be considered in investment thinking. An investment idea is only as good as it is suitable and worth the cost or consequences implementing it and taxes completely alter the case for an investment idea. You can have a really intuitive macro story or a great investment case but I’ve had to learn a lot about balancing my sense of what’s worthwhile and implementable in taxable portfolios – I’m still learning a ton every single day thanks to some very patient, colleagues and peers.

JiE: What is the best bit of advice you’ve received in your career?

EM: From an investment perspective – the classic one, don’t fight the fed! In terms of career advice, my current mentor and boss at WST, our CIO Roger Scheffel who – if he comes across this interview will be pleased to learn I listened to him once at least – gave me some great advice when I was considering a couple of paths at the firm.

He suggested that I picture my resume 10 – 20 years from now with my current role at the bottom, my dream job at the top and then a blank space in between. As you fill in the blank space with whatever opportunity you’re considering, take a step back, consider what story the resume is telling and whether or not it makes sense? Does the middle piece get you to your dream scenario and does it get you what you want in the meantime? It’s incredibly simple but very powerful advice that I acted on then, and I consider relevant to anyone whether changing roles or considering what additional work to take on in an existing role.

JiE: What do you work on, what are some of the challenges that you face in your role and what do you enjoy the most?

EM: My role as investment director is pretty extensive, as I sit in the middle of a firm that offers both wealth management and tactical, actively managed solutions that use ETFs. I’d say my focus is divided between product management and distribution for our tactical strategist and serving as investment strategist for the firm overall. Often that takes the shape of playing devil’s advocate for macro ideas I encounter or interesting investment vehicles that we find. I research and write the firms markets & economic content and I troubleshoot portfolio construction through a couple of lenses, fund selection specialized reporting, taking the lead on our efforts to integrate ESG or deliver thematic impact solutions, especially for our growing business advising small endowments and foundations. I really enjoy being the gatekeeper of sorts for our asset management partners and try to take a collaborative approach there. 

JiE: Has being a woman in the industry ever had any positive or negative impact?

EM: This will sounds like a punt but it isn’t something I think about much.Otherwise I think it has been a positive – I’m a sub-30 year old female working in a mature male dominated industry. There’s a natural and very encouraging interest in different perspectives and it’s assumed that I bring one, so I’ve never felt challenged or unwelcome on the basis of being female. That said, I recognise that I may have had a different experience 10 years ago. I’m very grateful to both women and men who’ve made it so I don’t have to be wary of the less appealing side of culture in this industry, and I’m lucky to have worked at firms whose cultures center on respect and competence. 

JiE: How have you seen asset management change during your time in the industry and what trends will shape the future?

EM: In a ‘word’ . . . ETFs . . . and not because they’re so central to my day-to-day, although my shift from traditional asset managers to an ETF focused RIA has definitely made me much more ETF aware.

In recent years, ETFs have bridged the role between a retail vehicle and occasional tool for institutions. They have exploded in the context of a challenging environment for active management in general – a very lucrative beta environment. There has also been an ongoing cost competition driving the environment in general.

Looking forward I expect a moderation of that beta market trend. Given what we’re seeing with the development of active ETFs, different types of mousetraps from an indexing perspective and the emerging conversation around non-transparent, I think we’ll see ETFs mature in pace with what feels like an inevitable rotation in style and factor favouritism in markets generally. 

JiE: Fixed Income ETFs were one of the big stories of 2019 – will that continue into 2020 and beyond?

EM: It was a huge year for fixed income ETFs and for fixed income in general, though the 4th quarter somewhat took the wind out of the sails of what was really shaping up to be a lights-out bond rally. At a point in the 3rd quarter the 30 was outperforming an S&P that was up very solid double digits!

Going forward, I expect that the passive fixed income ETF buying spree will mean revert in tandem with the general bond market softening, especially as people get more confident in the apparent global economic recovery and they begin to pull money from bond market ETFs or bond ETFs to deploy more bullish views. 

That’s going to create a big opportunity in 2020 for some of the more niche stuff. There are areas of carry in markets, in ideas like emerging local and bank loans and a few other ideas that are appealing and accessible through ETFs and through many cuts on that market segment – those types of tickers will get interesting in the coming year especially.

JiE: What other trends do you think are going to define the next few years in the ETF space?

EM: I hope we’ll see increasing interest in and more thoughtful use of some of the really smart multifactor products and more strategic fixed income betas. We could see some spicy stuff in the bond ETF world. These types of products offer a really great opportunity for issuers to work with advisors and participate more in the portfolio construction and idea gathering process. There’s an opportunity with these more sophisticated products to really educate alongside advisors and allocators.  

JiE: Tell us about some of the biggest challenges you see for ETFs moving forward.

EM:Execution!!! Through our tactical asset management business, execution as a competitive advantage and best execution as a responsibility are things I’ve worked to get better educated on and have become passionate about as an aspect of delivering our investment solutions.

Just for context, for nearly ten years we have leveraged institutional execution partners for all of our tactical trading, that is – in accounts we manage and where we control execution. This is the best way we’ve found to deliver our concept of best execution as it relates to our strategy. 

Model delivery – where we don’t control execution – is an increasing share of that business and obviously a big part of distribution strategy. In working to get up and running on platforms and figuring out how to deliver our solution I’ve become really focused on differences in execution approach as it relates to delivery of our solution. Everybody seems to tackle it differently and client experience can reflect that. As a tactical shop we are especially sensitive to the topic but I think literally everyone should be invested in this conversation.

It is an industry “macro” thing. Platforms and technology have been a big driver of ETF distribution at scale and likewise a huge pathway for asset management solutions that use ETFs. All of us – platforms, tech, model managers, allocators and product providers – need to consider whether or not we are being thoughtful about how we deliver model-based solutions, about how we view the client’s investment experience, both in the ETF and in whatever the framework for using the ETF is. 

It’s not a super fun conversation to have but I think issuers and asset managers who use ETFs really should make an effort to educate on the impacts of execution, demystify capital markets concepts as they relate to primary and secondary market liquidity and really educate on the difference in trading mutual funds versus ETFs especially at substantial sizes. 

As we drive more and more advisors towards managed money solutions and use of models there are going to be opportunities to trade more efficiently at the RIA level, but it’s going to require a lot of education.

It can be a very collaborative conversation and, at the end of the day, it’s about making sure that, through a combination of execution support, education and conversation with the platforms, the client gets the optimal end experience both in the ETF and in the strategy around it.

We’re all stakeholders in that discussion and I’d love to see it happen in the near term.

JiE: If you had a superpower what one thing would you change in the ETF industry today?

EM: So my superpower is to get the ETF Genie with 3 wishes and I would go with:

1. Execution – did I mention execution:-)?

2. More support for ETF entrepreneurs/independent ETF issuers/would be asset managers. A group of guys that quit their day jobs at 30 to go launch the one of the first eSports ETF come to mind. It’s brilliant and they are amazing, but I think they’d say there are barriers to entry and big barriers to achieving scale. We should have some sort of advocacy group or think tank for the little guys to foster small but really disruptive ideas.

3. Dogs at Inside ETFs – I have two dogs and am a clearer thinker and better human when they are around. A million dogs. 

JiE: You will be speaking at the upcoming Inside ETFs 2020 event in Florida. Tell us a bit about your session on Fixed Income in Uncertain Times and what attendees can expect to take away.

EM: 2019 was a very robust and unique year for bond markets. We saw quote “bull market for everything” and that reflected pretty extraordinary monetary policy moves and I’ll argue, and I don’t think anybody’s going to disagree too rigorously with me, that last year reshaped the global rates paradigm for a long time to come. 

So what does it mean to people trying to build portfolios and allocate? We want attendees to walk away with a good grip on the concept of investment versus trades – meaning long or intermediate term strategic playbooks versus tactical one-offs for your next couple of quarters. 

Now that the dust has settled on 2019 you will hear that those playbooks should be focused on total return rather than yield since real positive rates barely exist and yield is hard to come by – so be focused on total return rather than yield in strategic portfolio building.

We’ll also review a plate of “trade ideas” that we think investors can capitalize on with some unique ETFs, things like emerging local debt, bank loans, interesting plays on inflation that might not be part of the day to day playbook but that we really like for the next few months and that advisors can access through some really great products whose sponsors I am sure will be present.

JiE: Staying happy and positive at work, any secrets you can share?

EM: Stress is part of any job. We work in a competitive, fast moving industry and long term I think that happiness is going to be a function of whether you are doing the right job at a place you believe in with people you trust and respect. Long term you should be able to figure out if your work is an obstacle to your happiness.

Positivity to me is more of a day to day thing which rests on perspective and as I’ve matured in my career I think I’ve learned to maintain perspective better. Dogs help.

JiE: Work-life Balance. What is it for you and how do you achieve it?

EM: If you asked my parents they would say I don’t have it:-) but my husband would say “she’s just getting after it.” 

I believe strongly that people should not be hard on themselves about this. I am lucky that I have a job that I don’t want to strictly disconnect from for ‘x’ hours of the day and I think the lines have faded anyway given constant connectedness and desire for flexibility. 

Overall I’ve learned to take my own pulse relative to my concept of what makes me happy and as long as I’m literally jumping out of bed in the morning, or most mornings at least, I feel that’s fair. Work-life balance is whatever feels healthy and sustainable to you and I would say don’t apologise for getting after it.

Jobs in ETFs (JIE): Tell us briefly about your career path from university to the SEC to Associate General Counsel at the Investment Company Institute. Is it something that you had a vision for when you set out in terms of what you wanted or did you find yourself there?

Jane: Though it wasn’t entirely clear to me at law school what I wanted to do, I really enjoyed the securities regulation class so I became very interested in that area, which led to me joining the SEC, starting in their office of inspection examinations and then working in the investment management division on insurance products.

To broaden my scope, I accepted an offer with the law firm Sherman & Starling where I stayed for 4 years until shortly after I had my first child when it became abundantly clear that working for a law firm and managing family life would be very difficult. The Investment Company Institute happened to have a position open, so I made the change in the knowledge that I would have the work-life balance that I wanted.

After a time working in money market funds which experienced major collateral damage during the financial crisis, I wanted a new challenge and put my hand up for a role in ETFs.

JIE: Tell us a little bit about your day to day as Associate General Counsel, what do you work on and what you enjoy most and maybe how relevant ETFs are to that.

Jane: Most of my work is policy oriented, which I really enjoy. I never thought I’d be here 15 years, but we get to be at the forefront of all the policy issues with respect to registered funds, including ETFs, which is very exciting. I work closely on what’s coming out of the SEC.

We do a lot of education in the ETF space. Shelley Antoniewicz, who is in our research department, and I collaborate closely on ETFs, and have published various publications on ETFs. I also love the interaction with members as there’s a great flow of information both ways. We like to be the one-stop shop for fund issues, and though we don’t give them legal advice, we work closely on legal matters.

JIE: Everybody knows the ICI, but it’s difficult for us to know what the culture is like inside an organisation. Can you tell us a little bit about that.

Jane: One of the standouts in terms of culture and a major attraction for me, and I think a reason why we have so many employees with long tenures here, is that it offers a way to balance work and family, while working on really interesting topics. You can get some of that in certain places, but you don’t often get both.  

I expected to stay 3 to 4 years and then go in-house somewhere as a natural next step. I had been with the government, then a law firm, followed by the trade group, but I just really enjoy the work here. Things change all the time, and it never gets stale. 

JIE: Biggest challenge of your career to date and how did you navigate?

Jane: The financial crisis was definitely the most challenging time in my career—where it was important to have money market funds survive, and survive in the strongest possible way as a cash management option for both institutional and retail investors.

We were the first out of the gate to offer reforms and I think we might even still be the only institute that looked at what happened during the financial crisis and actually offered up our own industry reforms that ended up being implemented—a very proactive way to address a really bad situation.

Communication was key. We had terrific member interaction, as well as mutual respect with the regulators—not only the SEC but the Treasury and the Fed, hearing each other out even when we may have been on different sides of issues.

Our advocacy and the data that we provided during that time was crucial and might have been one of the first times we ever really married the two, legal and research, in such a way that really helped ensure that money market funds survived. 

JIE: It’s a particularly exciting time for ETFs now. The 20^th anniversary is coming up, breaking through $6 Trn at the end of 2019, the SEC decisions on the ETF Rule and non-transparent ETFs, there’s so much going on. Is there something that you’re particularly excited about for the ETF community?

Jane: Speaking purely from a regulatory standpoint, I’m very excited that the process to bring an ETF to market now is so much more streamlined. You still obviously have to interact with the SEC, but it’s from a disclosure standpoint. You no longer have to get your exemptive order, which is huge because that was an expensive and sometimes very long process.

The ETF rule really just streamlines everything. It took the best of all the exemptive orders and it even added some flexibility—a really positive use of the SEC’s resources. 

JIE: If you had one piece of advice to give the ETF industry looking forward, what would that be?

Jane: Continue to innovate. There is room to grow and the SEC at least right now seems to be more willing than ever to consider different types and styles of ETFs. I view this as a sort of a golden time for ETFs, at least from a regulatory standpoint in terms of being innovative and creative. Put your thinking caps on and get those products out there! 

JIE: Tell us how the exchanges are also evolving.

Jane: In response to the adoption of the ETF rule, the exchanges are looking to streamline their own process. They each have proposals which would streamline the exchange listing process for all ETFs that can comply with the new rule. This will be huge because that process, basically having to deal with the exchange and the division of trading and markets has always also been another hurdle that ETFs have had in launching new ETFs. So, again, that’s just one more thing to streamline the process.

Right now they’re just proposals, but we expect the SEC to address those proposals in mid-February. If they are actually adopted, it will make it much easier on both fronts, both from the division of investment management and the division of trading and markets to get an ETF launched, operated and listed on an exchange.

It’s really huge and I’m surprised that it hasn’t been picked up more. People have been focused on the ETF rule, but I would say streamlining the exchange listing process is almost nearly as important as the ETF rule from a regulatory standpoint. It’s a big, big deal for ETF sponsors. 

JIE: If you had a superpower, what one thing would you change in the ETF industry?

Jane: I think if I had a superpower I would probably make the ETF industry a little more diverse. Simply, I’d like to see more women and more minorities in the ETF industry. Diversity brings about different perspectives and it’s good for business. I’m involved in diversity and inclusion efforts at the ICI and we’re seeing progress, but if I could change it overnight I would.

JIE: You’ll be speaking at Insight ETFs in Florida. Tell us about your session on unwrapping the ETF rule and its impact and what attendees can expect to take away.

Jane: I’m delighted to be joining Mike Mundt of Stradley Ronon Stevens & Young and Dave Nadig of ETF Trends. We’ll go over the rule, some of the highlights and challenges, things that folks need to think about as they convert to the rule requirements.

We’ll discuss the exchange listing requirements. Each of the proposals from the three different exchanges are slightly different and it’s unclear at this point what the SEC will ultimately adopt, but I think it’s really interesting because it really does take down some of the barriers to being listed on an exchange. 

We’ll touch on non-transparent ETFs from the regulatory front and also make sure people understand that they are not covered by the new rule. Any sort of non-transparent or semi-transparent actively managed ETF will still have to get an exemptive order. They’ll also be probably subject to separate listing requirements by the exchange. Although their processes will likely be streamlined, it will not be quite as streamlined as those that can rely on the rule.

“Even though I’ve been working with ETFs for over 20 years now and have seen tremendous growth and change, I believe that right now we are at the very beginning of what will be the greatest time period for ETFs going forward”

Jobs in ETFs (JIE): Tell us about your career path and your introduction to ETFs.

Douglas Yones (Yones): After college, where I completed undergraduate degrees in Finance and Economics, I entered the financial services industry. My first job had the title “Stockbroker,” and I believed strongly in obtaining further education. After a few years, I felt it was time to make a move to a firm that supported this pursuit. I joined the Vanguard Group, and over the next few years, I was able to complete my MBA at Villanova alongside earning my Chartered Financial Consultant license from The American College.

I spent 17 great years at Vanguard where I regularly progressed into new areas or projects, obtaining exposure to diverse parts of the asset management business and financial services industry. After 10 years in the brokerage-dealer business, where I was involved in moving the business online and implementing best execution order routing, I switched over to Financial Advisor Services and became heavily involved in anything and everything ETFs. This ranged across product development, index management, index relationship, capital markets, sales & distribution and marketing. All facets of the business were wide open and there was very much an attitude of ‘if you want to go tackle that new challenge, run with it, it’s all yours’.  There was so much to learn and to be involved in since the ETF marketplace was only beginning.

JIE: Tell us about your international experience and time living in Hong Kong.

Yones: Time on project teams opening and developing international markets – including Europe, Canada and Asia – eventually led to a 3-year move to Hong Kong. There, we launched the original series of ETFs for Asia and helped to further develop the Australian market.

During the first conversation about launching Hong Kong ETFs, I suggested I wasn’t the right person for the role. I had never been to Asia at that point, nor did I have a grasp on the Asian ETF markets at that time. My advocate for taking the role was a stakeholder in the London business as we were working to launch the first set of UCITS ETFs for Vanguard – this was not someone in my direct line of reporting, but one of the stakeholders that I would frequently meet with during my time working in the UK. During these trips, I was diligent about setting full agendas, identifying goals for each meeting and developing relationships with new people in the region. Then on the trips home, I was equally diligent about recapping each meeting, setting forth the action points and following up with my new connections. I like to think that my stakeholders recognized this as valuable work ethic and the skills needed for opening up a new market. 

Over-delivering led me to the opportunity to live and work and build a new branch of our business in Asia. I learned early on in my career that any task handed you was an opportunity to over-deliver, and a way to open the door to more opportunities. 

Building a business in Asia was an incredible experience and made possible by a mix of good luck, good timing and a willingness to take on any new challenge. That’s a constant for me – always being excited by the opportunity to learn something new, to tackle a problem and find solutions where there doesn’t seem to be one.

JIE: It sounds like you had a fulfilling time at Vanguard. How did your move to the NYSE come about?

Yones: After Hong Kong, I moved back to Vanguard’s headquarters in the US and remained heavily involved in ETFs. The NYSE approached me with a view to developing the ETF business in a new way. We spent time charting a strategic shift and new vision for the business plan. We wanted to turn the New York Stock Exchange into a consultative partner for asset managers in the ETF industry. ETFs were quickly becoming about a third of our volume each day, and we knew there was an opportunity to serve the industry in a bigger way than ever before.

JIE: Are there core values that have served you along the way, taking you to where you are today?

Yones: Number one for me is that people come first – both in work and in life. When you wake up in the morning with the belief that everyone you meet has incredible value, and it’s your job as a leader to extract that value, it changes the way you think about the people you surround yourself with, and what you know you can achieve by working together. We all have different capabilities; we’re all great at different things. Just like a Tetris puzzle, no one piece is the same shape, but together we can be extremely powerful.

The second thing that has always been a mantra for me is to over-deliver on everything. For example: let’s say you are asked to cover a meeting to represent your busy boss. Go to that meeting, take notes, write up an easily digestible synopsis, maybe add an executive summary up front with some key decision points and your own recommendations. If that’s what you deliver for a basic meeting, what else does that demonstrate you are capable of producing for the business? Trust me, your boss will wonder that too.

My third mantra is to always be in the moment. I always try to live my life in the moment. Outside of work is a good example of that: my family knows that when it’s dinner time there’s no electronics. The phones are gone and we’re involved, we’re in the moment. The same for work. If you are in a meeting, be in that meeting. When you need to work on a long-term project, block the time and stick to the plan. 

This can and does work, but we can be so busy that we forget to be in the moment. For those who haven’t read the ‘8th Habit’ by Stephen Covey, it’s probably one of the greatest books to touch on this idea, full of tips on how to manage your life so that you can define your life’s priorities and then powerful tricks for how to stick to them.

JIE: Are there elements of culture at the New York Stock Exchange that drew you to the business and keep you there?

Yones: The shared ICE/NYSE culture is 100% team work, 100% collaboration, and 100% about always doing the right thing. There are no party lines, no politics, no focus on hierarchy. It drew me in immediately and over 4 years later, it’s everything I had hoped it would be and more.

Even though it’s a 6,000+ person company, ICE feels like a nimble entrepreneurial organization. Everybody’s in it together, constantly looking for new opportunities and asking if there are better efficiencies that we can provide to the markets – whether it’s ETFs, trading hard and soft commodities, helping companies go public or creating a platform for investing in crypto currencies such as Bitcoin. 

Yes the NYSE dates back to 1792 and is one of the oldest organizations in the country, yet to work here feels like you’re working at a start-up with all the passion, excitement and fire that comes with it. It’s a combination of the power house brand that the world knows alongside an entrepreneurial, customer-centric spirit and drive.

JIE: What’s the secret to staying happy and positive at work? Any secrets you can share?

Yones: I read this many years ago, I wish I could remember where, but it’s the greatest tip about how to “be happy” that I could offer anyone. Trust me, it works – people just have to be willing to let it work – and it’s ridiculously simple. 

Every morning before you start your day, unplug – so no distractions – and take 2-5 minutes to go through everything in your life that is positive. 

When you start the exercise your mind actually fights you. You might tell yourself you’re healthy, but then your mind starts reminding you that your knee hurts or you should be working out more… Begin by wrapping those thoughts in a bubble and let them float away.

It takes time to master, but with practice every day, your mind gets stronger at blocking the negative thoughts. Like a workout programme, it takes time to kick in.

Once you get really good at it, you can prep for important events like a speech or a major client meeting. It’s like a super power that you can use at any time. I started 15 years ago and still do it every day. It’s not anything magical, but it actually does work. And I think the article said 10 minutes was the magic number, but 2-5 has always worked for me.

JIE: What do you look for in a team member? 

Yones: I look for an attitude, a positive mindset, someone who is willing to learn and adapt. More important than experience is that someone is excited to learn new things and new skills. 

The world of ETFs is growing so fast that all of us have to be learning all of the time. I feel like I’m learning something new every day, so I value a positive attitude and a willingness to dive deep and learn.

The best teams are those where we are surrounded with people that enjoy each other, believe and love the work we do, and strive towards achieving aggressive goals. When that happens I find we’re no longer “working”, we’re coming in every day and spending time with the people we enjoy being with, all while executing with a passion to meet and exceed our stated goals.

JIE: It’s an exciting time for ETFs. The 20^th anniversary, breaking through the $6 Trn mark globally at the end of last year, the SEC decision on the ETF rule and non-transparent ETFs. What are you most excited about for the ETF community?

Yones: Even though I’ve been working with ETFs for over 20 years now and have seen tremendous growth and change, I believe that right now we are at the very beginning of what will be the greatest time period for ETFs going forward.

Investors today are not just better educated, but they actually care about being better educated and want to seek out and find information about their investments. They are focused on transparency: knowing what they own and how they own it. The ETF industry has built-in transparency on overall fees and the total cost of investing.

At the same time, you have more product issuers developing unique and innovative products to cover almost every investment option. On top of that, just about every brokerage firm has gone to zero commission for ETFs in the past 4 months.

Based on the combination of these factors, the future for ETFs has never been brighter. 

JIE: So it’s a great time to be in the industry. How about entering the industry?

Yones: Whether you’re in this industry today or you’re planning to enter, doesn’t really matter. The market growth rate from here should be exponential.

Even for institutions that have historically only considered ETFs, with zero commission platforms and global access the ETF wrapper is moving to the top of the lists. 

This goes all the way down to the individual investor. My daughter makes about $100 a day when she babysits. Due to changes in the industry in the past 6 months, she can now take that $100 and buy a portfolio of ETFs that’s diversified globally across every single asset class – for zero commissions. Never before have investors had this opportunity.  Consider the number of investors that have been left out of the growth of the equity and fixed income markets because buying $100 worth of stock with $10 in commissions meant losing 10% of your return. You’re not making that back up, so there’s no reason to invest. All of that changed in the last few months, so there has never been a better time to use ETFs to invest. 

JIE: What do you see as the greatest challenge on the horizon?

Yones: At the NYSE, we’re building a market structure that can support and grow alongside significant industry growth. We are the ‘E’ in ETFs, and we are always focused on shaping the next developments in capital markets for the ETF industry. 

In 2020 we are evolving different models for ETF trading, and plan to offer ETF issuers even more choice. Later this year we’ll offer issuers to be able to choose the Designated Market Maker model for their ETFs, which is the hallmark of the New York Stock Exchange Floor. We’re excited to debut this model to the ETF industry and to extend the benefits of state-of-the-art technology combined with human judgment and accountability. 

JIE: Looking back at 2019, Fixed Income ETFs was one of the main stories. Do you think that will continue in 2020 and beyond, and are there other trends that you think are going to define the next few years?

Yones: There was over $155 billion in net cash flow last year into fixed income ETFs which is impressive considering there’s still considerable uncovered ground for product development in the space. We believe that continues into 2020 as asset managers grow and develop their product offer in this space. ICE Data Services notably has been developing and acquiring many of the major indices not yet covered by ETFs, and as result we have a lot to offer asset managers looking to take advantage of this trend.

JIE: If you had one piece of advice for the ETF industry looking forward into the future what would that be?

Yones: This is applicable to more than just our industry – anyone who wakes up every day ready to go out to learn something new will continue to be better off. The ETF industry is evolving and the regulatory, capital markets and competitive landscapes continue to change. So if you wake up every day and learn something new, then you’re well positioned to evolve alongside the industry and find new avenues to success. 

JIE: If you had a super-power, what one thing would you change in the ETF space?

Yones: Perfect trading for every ETF every single day!

JIE: You’ll be speaking at the upcoming Inside ETFs event in Florida which kicks off January 24. Can you tell us a bit about your session on the SEC ruling on non-transparent ETFs and implications for asset managers and investors?

Yones: As I mentioned, I think this is the most exciting time for the ETF industry in the last decade. The opportunity set is real and it’s available to everyone. 

The idea that a traditional fund manager will now, pending all approvals and products going live, be able to apply their exact same modelling and alpha generating investment behavior within the ETF wrapper is a win-win-win across every part of the business. Active managers will have access to the benefits of increased efficiencies and a distribution model that is truly global – in a wrapper that can reduce the total cost of investment. 

Our session will cover all of the different active non-transparent models that are currently approved by the Investment Management division of the SEC. The NYSE ETF Team is working with every single model and we are excited to list and trade them on our Exchanges.  

I would highly encourage anyone with questions to attend this session and connect with me and my team to talk through plans afterwards.

JIE: What’s work life balance for you and how do you achieve it?

Yones: I think work life balance differs for everyone. I fall back on my ‘be in the moment’ mantra. Stephen Covey talks about this process and includes a great exercise in his book to help achieve personal balance: write down a list of the most important things to you in your life e.g. personal health, your overall wealth, success in your career, family time, time with your partner, time playing a sport, reading time, etc. and force yourself to rank them top to bottom.

It challenges you to be honest with yourself, and then his book teaches you to build your life around the list, which is easier said than done. However I can tell you that continually going through the exercise helps keep you on track.

Be prepared for distribution. You should give distribution really serious consideration and have a clear strategy. It is likely that it will be a number of years before you start to succeed, so if you’re thinking 3-5 years, then double it and if that’s OK for you, then go for it.”

Jobs in ETFs: Tell us a little about your education, whether it led you directly into your career or if there was a pivot into ETFs?

Martijn Rozemuller: I studied engineering and business administration but, during my first year at university, became a member of the investment society where we initially looked at individual stocks and options. 

I became intrigued by investing options and from this went on to work with a local options broker/arbitrage firm where I ultimately became a partner. We had floor trading as it is traditionally remembered – with tickets – and from this developed it into more sophisticated IT processes with on screen trading. 

During a sabbatical I took time to review my own portfolio and found that the managers running it had put some pretty expensive funds in there and so I reshuffled it and introduced ETFs which I had come across around that time. It also made me realise how very difficult it is to outperform the market so at this time I became more and more interested in ETFs.

Dutch investors can reclaim dividend tax, so I worked on finding a more efficient way to use ETFs and this is how Think ETFs came about. 

JiE: Are ETFs a passion, profession or both?

MR: Ultimately, it’s a job and I get paid for it, but I do love it and I’ve developed these ETFs because from an investor point of view I saw that the perfect product wasn’t available. Trying to solve potential problems is more like having a passion than a job. 

JiE: How hard is it for new entrants to break into the space and what does it take? 

MR: It will be about offering products that are new and bespoke to find any traction. We tried to find different types of exposure that were not being offered – to rethink exposure and how you play a certain type of market. It’s difficult to differentiate yourself if you do the same as your neighbour, so new competitors will need to bring something new to the table. 

JiE: Having experienced both the multinational corporation and entrepreneurial business, can you share some insights on how they differ and what it takes to succeed in two very different environments?

MR: The bigger you are the more procedures and compliance you will have in place. The key is to be able to stay nimble, with good procedures and compliance, while staying entrepreneurial. The combination of being a small business attached to a big one means we are able to do this. 

Jobs in ETFs: From a single-office Netherlands centric model at Think ETFs to a broader European remit at VanEck, what new challenges have you faced?

MR: We moved from 10 people in an open office to a multi-national company with three offices in three different countries so setting up the right communication channels was important. We have managed this quite well and I visit the international offices frequently. 

We also made changes in communications to external stakeholders. In this case it includes catering for our clients globally, having local language websites and a local office where possible with a native speaker to ensure we are able to get the message across Europe. 

Jobs in ETFs: Was there something cultural about VanEck that clicked with you and the team at Think ETFs?

MR: VanEck is a private company and still family owned. The current CEO is second generation and runs the business with a long-term strategy. We took the same approach at Think ETFs for the first ten years when we started so there was a very important match in that sense. 

JiE: What do you look for when you’re making a new hire? 

MR: Being in the financial industry for the right reasons is key. We want people who can make a difference and will share our mission of structuring products the best way possible. 

It helps if they are open-minded and willing to share their ideas. Communication is also key, if mistakes are made that’s OK, but we need to know quickly and then we can solve them. 

JiE: What core values have served you along the way, taking you to where you are today?

MR: The most valuable thing is perseverance. We started in 2008 when nothing was easy. We had a long-term plan and have stuck to the goals of this plan.

JiE: Staying happy and positive at work – any secrets you can share?

MR: I still go out and give presentations to clients. This really helps me stay current and visible and excited by what I do. I get a lot of great feedback and I try to be very interactive. Interaction with the end clients really make a difference. 

JiE: What has been the biggest challenge of your career?

MR: Distribution. When we listed our first product we believed (and still do) that they were the best but selling them was a different ball game because for retail investors it’s hard to understand every aspect of an ETF. 

JiE: What advice would you give to people starting out in the ETF industry today?

MR: Be prepared for distribution. You should give distribution really serious consideration and have a clear strategy. It is likely that it will be a number of years before you start to succeed, so if you’re thinking 3-5 years, then double it and if that’s OK for you, then go for it. 

JiE: What’s the greatest challenge on the horizon for ETFs?

MR: It still has to be distribution. However, the biggest opportunity is the Fintech solution across Europe. The combination of a really good Fintech solution that will reach end investors with a good product will be the key to growth and better distribution. 

The gap between distribution and product isn’t as big as it was a few years ago. 

The end product and client need to be considered together to find a solution and make money in the portfolio. As an industry we have to offer that whole solution to the end client. 

JiE: What are you most excited about for the ETF community?

MR: To me there is still a really big group of people excluded who are not investing at all and this mentality needs to change. 10-15 years ago it was hard to invest, but these days this is not the case. ETFs can offer a fool-proof way to invest with the right guidance. It’s exciting being able to enable investors though we still need to improve communication and education as an industry. 

Jobs in ETFs: What is work-life balance for you and how do you achieve it?

MR: I manage reasonably well I think. The office is a 15 minute bike ride from home and I’m able to drop my youngest daughter off at school 

I have seven children, (four girls and three boys) the oldest two are at university and my youngest is 9. I try to spend time with the family as much as I can, be at their sports activities, enjoy a movie together or eating out. If I need to work more, then I will do it in the evening when they sleep. 

I would say that I spend the least amount of time on myself although for the past couple of years I have incorporated exercise into my routine – running and/or going to the gym three times a week.

Jobs in ETFs sat down with Jos in advance of the upcoming ETFGI Global ETFs Insights Summit at the St. Regis in Toronto to discuss his NEO, how we would change the ETF landscape for the better, future trends and work-life balance.

I saw an opportunity to do something different and believed in its commercial success – a stock exchange doing what is right for the investor and the capital raiser, so I co-founded NEO. This is the entire philosophy behind NEO, and it has taken my experience from a lifetime of setting up, advising and leading exchanges across the globe to turn it into something that we now know works. NEO is the icing on the cake of my career. 

Jobs in ETFs: Tell us about yourself and your professional experience. Why the passion for exchanges and your path to co-founding NEO?

Jos Schmitt: My entire career has revolved around the exchange world, starting on a project with Accenture (Arthur Andersen Consulting back then) replacing an exchange trading floor with an electronic trading platform. This was followed by work on the design of a new derivatives exchange and clearing house in Brussels, where I was afterwards given the CEO role as a young and inexperienced 28-year-old, but with an incredible passion and curiosity for exchange vehicles. Those vehicles that allow investors, seeking to build financial wellness, to pass on capital to entrepreneurs, seeking to build companies. The combination of the two leads to a virtuous cycle allowing to grow businesses, create more jobs, generate more wealth, and continuously grow the economy to the benefit of the society as a whole. 

Things changed when stock exchanges became for profit organizations and started to focus on their own shareholders rather than the investors and entrepreneurs they are supposed to service. I saw the core values driving stock exchanges disappear in favour of making as much money as possible for themselves, translating into allowing and even enabling unfairness in the market by privileging certain types of market participants over others, translating into pushing companies to go public even if it is not the right thing to do for the company or the investors, and translating into charging exorbitant fees for market data. Combine that with a quasi-monopoly situation and the losers are everyone else, as well as innovation.

I saw an opportunity to do something different and believed in its commercial success – a stock exchange doing what is right for the investor and the capital raiser, so I co-founded NEO. This is the entire philosophy behind NEO, and it has taken my experience from a lifetime of setting up, advising and leading exchanges across the globe to turn it into something that we now know works. NEO is the icing on the cake of my career. 

JiE: Tell us about your biggest challenge and how you navigated it.

JS: Disruption meeting skepticism. When you want to do things in a different way, regardless of how laudable your intentions are, you always face people who prefer the status quo. Skepticism and that lack of desire to embrace change is often what I have faced as the biggest challenge.

At NEO our first trades, our first listings, and I can go on, were very difficult to unlock, but once you start to get traction, things change. You do need however to identify the early adopters who share your beliefs and who think that disruption for the better is worth taking a risk.

If you have a good value proposition and a good go-to-market strategy, combined with passion and perseverance, you will get there. 

JiE: What advice would you give to those starting out in the industry now?  

JS: Be curious, be passionate, work hard, and also be able, when required, to be patient. Try to grab the right opportunities that pass by and don’t be afraid to fail.

Curiosity makes you better and enables your personal growth. It will also impress people around you and allow you to identify what you are most passionate about.

You won’t necessarily know immediately what’s going to be your passion – I had no idea when I started my career that the exchange business would be where I wanted to be. I had the patience to figure it out.

Without hard work and commitment to what you do, don’t expect success. If things are not going exactly the way you want them to go, again be patient. You need to discover, learn, appreciate and understand how work works and what makes success.

Finally, pay attention to the opportunities around you. We all have opportunities but most of us miss them, ignore them or are afraid of them. Once you see an opportunity and feel that it is something that really fits you, be willing to take a risk and go after it. Failing is not a bad thing, in fact you learn so much more from failure than success, and it sets you up in an even better way for your future successes.

JiE: Is there something you enjoy most within the day to day? 

JS: It’s a combination of things but what I enjoy most is the creative process – observing, listening and identifying pain points or opportunities, and then addressing them with new, different and often disruptive solutions.

And an organization can never have too many ideas – out of ten ideas you’re lucky if there’s one that is going to lead to something. Idea generation is extremely important, and I enjoy that but also the rigorous process of killing ideas and only progressing the ones that can lead to something.

NEO is a stock exchange at its core – we support listings, trading, and market data distribution, those are the business lines that retain most of our attention, but we are always looking for new opportunities. This led for instance to the launch of a distribution platform, called NEO Connect, for financial assets that are not listed on an exchange. We started leveraging it for public and private mutual funds, we call these platform traded funds or PTFs, and are now expanding it into supporting private corporates.

We are working on quite a few other ideas. You’ll soon see other interesting initiatives emerging from NEO going far beyond the classical stock exchange business, but always centered on that mission of allowing investors and capital raisers to meet each other in the most efficient way possible.

JiE: Can you tell us a little bit about how Canadian institutional investors are using ETFs?

JS: Trends in Canada are similar to what we see in the rest of the world where the use of ETFs keeps growing because of how efficient they are in providing the right exposure in consideration of the core drivers of returns – macro factors such as the business cycle, inflation, etc. and style factors such as value, momentum, etc. Once, based on your assessment of those factors, you have defined what you believe the right portfolio is, ETFs can be leveraged for the core allocation, tactical adjustments, international diversification, rebalancing, etc.  No need to worry about all the individual underlying assets, as ETFs will give you the same results and at a very low cost. If you want to generate additional Alpha on top of that, you need to start zooming in on individual securities, countries, etc. but you better be pretty skilled at it. 

While having experienced substantial growth, in Canada there is still a lot of room for more. The first ETF may have been launched in Canada but if you just look at ETFs AUM in Canada vs the US it’s roughly $150 Bn in Canada compared to over $4 Trn in the US – far from the 1:10 ratio that we like to use in terms of relative comparisons between these two countries.

JiE: What trends will define the next few years for the ETF industry?

JS: Beside further growth in the products that are available today, we’re going to see new types of ETFs emerging and becoming part of the mainstream. Think about actively managed ETFs, something that we have seen developing in the Canadian market and can be expected to take off in the US subsequent to some of the regulatory changes around disclosure. Think about ETFs on liquid alternative assets. Under the current macro climate, investment managers are looking for exposure to alternative uncorrelated assets and having those accessible under an efficient ETF wrapper seems like a promising proposal. I see a lot of potential for additional growth there.

JiE: If you had a superpower, what one thing would you change in the ETF industry?

JS: We’ve been at it for 30 years now and there’s still an incredible need for education. A good example is that investors often don’t understand that the liquidity of the ETF is not driven by the volume that you see in the ETF – it’s driven by the liquidity of the assets on which it is based. If I had a magic wand, I would make everyone understand the products, their benefits, how they work and what you need to look at when you want to leverage them and invest in them. So many more opportunities could be unleashed if there was a better understanding of how ETFs work.  

In Canada, we have an additional issue which is quite appalling. Like in many other countries across the globe, trading of Canadian listed securities, including ETFs, is spread across a multitude of different marketplaces – we have 14 now to be compared with over 50 marketplaces in the US. What we don’t have in Canada is a mandated consolidated quote i.e. the vast majority of retail investors – close to 100%, and financial advisors – close to 95%, don’t see the full volume traded and full bid and ask spread in Canadian listed securities. They only see the volume and bid and ask spread of the listing exchange, meaning that on average they miss 60-70% of the full picture, if not worse. This leads to uninformed investors, quality of execution challenges, major disruption if the listing venue has a technology issue and listed issuers, including ETF providers, being unable to properly benefit from showcasing the real activity in their security when they discuss investment opportunities. 

In the US this issue was tackled in the late 1970s!

We’ve been working and fighting for a consolidated quote solution through multiple channels and I hope we will resolve it one day. It’s quite fascinating that in 2019 Canada is still facing an issue of this nature. I would fix it tomorrow if I could, as it would benefit investors, capital-raisers and take us out of the dark ages.

JiE: You’ll be speaking at the upcoming ETFGI Global ETFs Insights Summit in Toronto on December 2nd at St. Regis. Tell us about your session without giving it away. 

JS: While acknowledging the benefits of ETFs and the fact that there’s still enormous potential for growth in the Canadian marketplace, we need to understand what elements are hindering their growth and develop answers. 

We’ll be discussing trade fragmentation, consolidated market data, internalization, exchange fee models and so on.

JiE: Staying happy and positive at work, are there any secrets you can share?

JS: If you’re passionate about what you do, it makes everything enjoyable. It doesn’t make every day an easy day, but it makes them all enjoyable. Having a solid team is critical in achieving that too. A high quality and committed team you can rely upon, a team that you enjoy working with. Let’s not forget, that team is your family during the working part of the day. 

JiE: What is work-life balance for you and how do you achieve it?

JS: Being involved in entrepreneurial initiatives takes time and focus. Balancing that with your family life comes down not to the amount of time but the quality of the time that you spend together with your family. As an example, we have no TV at home – the time that we are together is time that we truly spend together, being very engaged with each other. External activities, we always do together. Just like you need to have passion at work, you need to have passion at home. 

JiE: Tell us a little bit about your involvement with the WE charity?

JS: I was exposed to WE about 10 years ago – it started in Canada but it’s a pretty global organization now. WE seeks to lift people out of poverty, in underdeveloped areas/communities across the world, through five pillars: access to food, access to water, access to health, education and providing economic opportunity. It’s all about helping people to help themselves in a sustainable fashion, just like Mao said – don’t give them fish, but teach them how to fish.

We engaged with them initially on a project in rural Kenya to help develop those 5 pillars, including a primary school to realize the education component. Then we continued by supporting the establishment of a secondary school. Now we are at the next stage where we are supporting the setting up of a business school. You can see the path to not only sustainability but also future growth, giving the local communities not only a better life experience but the opportunity to have dreams. We love that vision and the strategy to achieve it.

The people behind WE are incredibly passionate about what they do, you can’t miss that. They work hard, are creative and lack no perseverance in fulfilling their vision. Combining that attitude with a vision that we truly share is what got us – myself, my family, my friends and organizations close to us – to support them.  

Once the business school is ready, I hope we’re going to see some initial entrepreneurs emerging and maybe we can add some value there!