Building a strong investment culture

Friday 29 July 2016

Developing a strong investment culture is key to the success of any institution, argues James Ware, CFA.


James Ware, CFA
James Ware, CFA

Investment culture has become accepted as a key ingredient to success. In an FCG survey of more 5,000 professionals in 10 countries, 97% of investment professionals agreed with the statement, “Culture is important to our firm’s success”. And when asked the follow-up question: Why? What are the benefits? – two answers stand out: 1) talent (attracting and retaining) and 2) decision-making. These answers make sense: investment professionals want to work at reputable shops that have strong investment cultures and good decision-making. The benefits of culture can be summarized in the word “workability”; meaning environments where there are minimum distractions and red tape.

The core of such a culture consists of three factors:

  • Purpose: a clear and compelling reason for existing. Meaningful work. Belonging to something that is “bigger than oneself.”
  • Trust: sufficient levels of trust in one’s leaders and colleagues
  • Values: a set of values and behaviours that are unique to the investment challenge.


Purpose extends beyond the legitimate goal of “making excellent returns for our clients”. Many firms are searching for a larger purpose to include in their mission statement. is may be driven by the influx of millennials in the work force who are hungry for purpose. Or maybe investment leaders have read Daniel Pink’s Drive in which he says: “The most deeply motivated people – not to mention those who are most productive and satisfied – hitch their desires to a cause larger than themselves.”

Or perhaps, they’ve read Simon Sinek’s Start with Why, in which he says about workers: “Deep inside, they all love being a part of something bigger than themselves.”

Sinek goes on to pose an interesting challenge to all of us: “The goal of business should not be to do business with anyone who simply wants what you have. It should be to focus on the people who believe what you believe. When we are selective about doing business only with those who believe in our WHY, trust emerges.”So, purpose, if done correctly, actually reinforces the second factor above: trust. e change that is occurring in the investment world around purpose is that the main motivator for investment professionals – other than money – has been the work itself, followed by clients and colleagues and purpose in that order. But now investment leaders are responding to the work of Pink, Sinek and others and creating broader statements of meaning: why is investment work important? What broader value does it provide? An example is a large asset manager in the UK that has discussed and developed the following statement: “Our purpose is to help people achieve their long-term financial goals, making a difference in people’s lives, in our industry and in our community.”

Another purpose-driven organisation is Texas Teachers in Austin. CIO Britt Harris and his investment team are passionately committed to providing good retirement income to the teachers of the state. As many of the staff members will tell you: “I could make more money working on Wall Street, but I really care about the teachers who taught my kids. I want to do right by them.” Clearly, purpose motivates these investment professionals. Their WHY and those of their clients (teachers) are completely aligned, as Sinek suggests. And they have had stellar results.


Trust is the platform on which “workability” operates. Trust is a skill. When professionals understand the components of it, they can commit to becoming increasingly trustworthy. The six factors that influence trust are as follows:

  • Similarities (values and interests shared)
  • Interests aligned (common goals and incentives)
  • Benevolent concern (win/win, we care about each other)
  • Capabilities (competence, ability to deliver promised results)
  • Predictability (consistency, reliable over time)
  • Familiarity (open and frequent communication. Transparency)

When teams have trust issues, it’s useful to trot out these factors and ask, “Which ones are deficient? That is, which are leading to the distrust?” Sometimes a firm’s compensation system pits colleagues against each other. Sometimes a person is in the wrong role, so his colleagues think: “He’s a good guy, but he’s NOT good in that role…so, I don’t trust his work product.” Still other times, a colleague is inconsistent. She is usually trustworthy, but occasionally there are significant lapses. If sufficient openness and candor exists on a team, then honest discussions can help identify and clear up the trust issues…article continued in the Summer 2016 issue of Professional Investor [login required].