Welcome to the podcast that shares the views of high-level leaders in the European and global financial services industry.

. – “Welcome to Shaping Finance, a podcast which offers a platform to high – level decision makers and shapers in international finance. My name is Nicolas Mackel. I’m the CEO of Luxembourg for Finance and the host of this podcast.

I am very pleased to welcome today Marie Dzanis. Marie is CEO of Northern Trust Global Investments, and Head of Northern Trust Asset Management EMEA. Mary is an experienced leader in financial services, having successfully built advanced businesses and product lines for global organisations, including BlackRock’s iShares business, JP Morgan Asset Management and Smith Barney. On top of her 30 years of multi-faceted industry experience, Marie sits on the women’s board of the University of Chicago Cancer Foundation. She is involved in Women in ETFs and holds a position on the advisory board for BlinkNow foundation. She’s also a producer for CNN Hero of the Year award winner Maggie Doyne’s documentary Love Letters to my Children. A regular contributor to media, Marie was also awarded the Women to Watch award by Investment News in 2017 and a Top Women in Asset Management awards. Welcome to Shaping Finance, Marie.

Marie Dzanis. – “Thank you for having me. I’m excited to be here.

In my introduction, I alluded of course to your career of over 30 years of investment management experience, from securities lending and trading to product development, sales and now, management. From your vantage point, how will this crisis be different from previous crises and from moments of disruption the industry has gone through before?

“So our industry is about change. I remember years ago, there was a presentation called ‘This Time it’s Different’. And the summary was, is that change is constant, and even systemic Black Swan events that are supposed to be extreme outliers, one in 1000 years, things like the invention of the internet or the 2008 financial crisis, they actually occur more frequently than analysis predicts because of the distribution of systemic outcomes is not normal. It’s fat tailed. So in other words, you’ve seen a lot over the years and as it’s related to uncertainty, what matters of what you do and how you conduct yourself during that time is of importance. And that’s where leadership comes in. COVID has thrust people into a non-transparent situation where, ready or not, they’re managing remotely, they’re working online and working with their partners in new ways.

There are teams that might not have met their managers, that have never been in the building that they work in. They have different, very different implications than just a group of people who’ve worked together for many years and now suddenly are remote. We’re talking about new joiners at all stages of business need to understand, to learn how to be effective in a corporate culture and have success in their role, and then become eligible for promotion in a remote environment. And while there’s a technical element of success, there’s a more cultural way to navigate a firm to be effective. The other consideration is that these employees are working in their homes. They’re working from their living rooms, in their kitchen and their job experience is the same, whether they’re working from their kitchen, no matter what firm they work for. And so loyalty can be at risk for companies. So with COVID at this point in time events moving successfully forward into the new better environment requires a very distinct type of leadership, which I’ll call radically human. Someone who’s confident in their leadership style, who can learn on the fly, who can drive not only a vision, but collectively get buy-in from their businesses and manage through change and uncertainty with empathy and compassion. And today’s leaders require vulnerability to be self-aware and to be able to manage communities of people.

There’s certain attraction to having answers for everything, but it’s okay to admit you don’t have all the answers. Nobody had the playbook for COVID. You make decisions with the best available information and the concept of humility, which is actually a Northern Trust Asset Management value, helps leaders understand that we’re in a people business and we serve our clients and employees. So I’m excited to think that COVID has forever changed all companies and industries towards something that I personally, and our business has believed in, in my corporation for a long time, that diversity at the leadership table can help you get better outcomes for everyone. There have been some positive proof points in the past, and especially during COVID that illustrate the benefits of people with different views of the world, contributing with different backgrounds, offering their perspective can drive better financial results than non-diverse firms, and you have a more fulsome and positive experience for all. We have to continue to embrace this.

And we will certainly get back to diversity in a few minutes, but the financial markets have so far proven not only resilient, but even a bit exuberant. There is however, a lot of uncertainty on how the economic consequences of the crisis will affect financial markets and where interest rates will go. How does an asset manager like you confront these uncertainties?

“So three things come to mind. We stay very close to our clients to help them navigate through changes and what they mean for them and help them achieve their outcomes. Northern Trust Asset Management globally has clients of all types, but we have sophisticated professional investors here in region who are looking for a very specific outcome, and as markets change, and they invariably do, we need to make sure that investors are aligned with the outcomes that they’re trying to get, whether they’re trying to manage risk, meet their income obligation, maturation, grow their assets, segment cash, deploy cash, we’re committed to working with our clients to make sure you have investments that you need to achieve your outcomes. And we do this with transparency.

During times of change, there can be risk, and we have a firm belief that the investor should be aware of and get paid for the risk they take. Risk isn’t a good or bad thing. It just needs to be quantified. And we see this with the institutional use and interest in our quant active strategies. We’ve been managing quant active for 30 years. So the largest institutions in the world work with us to quantify and get paid for risk, especially during times of uncertainty.

And the last thing I would say on this is have a sound investment thesis. Especially during times of change, there’s a lot of interest in thematic investments, tactical opportunities, but the foundation or the main part of your portfolio has to have a sound and solid strategy to meet your investment needs and outcomes. This is not just about an exercise in academia or theoretics. This comes from working with asset managers with experience in managing through multiple market cycles, so your portfolios are considered with your evolving needs. And so we believe that investing serves a higher purpose, because you’re trying to get those outcomes of individuals and serve investors, and it should be done intentionally and implemented efficiently.

You were talking about change. One aspect of change that is brought about by the COVID crisis is of course the acceleration of the adoption of digital solutions. In what ways do you think technology will continue to shape the future of the asset management industry?

“There is no question that COVID accelerated the technology agenda. We in the industry have seen that we can be operationally resilient while out of the office, as well as the fact that we can meet our key performance indicators and our client deliverables while being remote. For those nonbelievers, this is an important proof point that we can be leveraging technology in many different ways in a highly regulated industry that serves investors of all types. So first, communication, how we do business virtually has evolved. Technology will not be in place of every in-person meeting in the future, but with Zoom and WebEx, we do get to bring in people and resources globally, who otherwise they might not be able to meet. Younger talent gets to interact with clients, whereas they might not be included in meetings, and even meeting topics that were reserved for heavily orchestrated in-person due diligence meetings or client reviews can be supplemented with quick, smart, bright burst meetings that allow you to quickly catch up and solve problems and update on trends and clients really like that.

There are many opportunities to use technology alongside of portfolio management, including things like artificial intelligence for algorithms and this aids in identifying new opportunities to be more efficient and effective, and support human beings in what they do. And from the investor standpoint, there is opportunity for asset managers to have better model delivery through technology and engage with the community on education, ideas, and overall strategy discussion. So is this permanent? Part of it? Absolutely. It’s not only efficient and cost savings for delivery, but it’s reinforced when we note that things like the EU Recovery Fund has two key outcomes. One is re-recovery and two, the digitalisation of the European Union. The next generation is also going to demand change as well. And they will invest, engage through their platform of choice, which is technology.

You mentioned it already, the Green Recovery, and that is another area of sustainable finance that has certainly been accelerated by the COVID crisis. And one of the positive things is that over the last couple of years, the investment industry has eagerly embraced the sustainable finance opportunity. How do you as Northern Trust Asset Management, engage with the companies you invest in to address their climate risks and to bring about the necessary transition or even to accelerate it?

“We are one of the founding investors and members of Climate Action 100, which was formed in 2017, and this engages with companies to address climate risk. So this is a collective of more than 540 investors with over 52 trillion in assets that participate in this initiative today. And it engages with over 167 companies that represent 80% of corporate greenhouse gas emissions globally. So we ask companies to take management accountability and boardroom oversight for climate risks and review ways that they can take action to reduce greenhouse gas emissions, consistent with the Paris Agreement goals and improve climate-related disclosures. So far, this is making an impact. 70% of the companies on the list have set long-term quantitative targets for reducing greenhouse gas emissions linked to global warming. And 59 of those companies have formally supported the Task Force of Climate-related Financial Disclosure or TCFD. And these recommendations are to improve the quality and consistency of climate change data reported by companies.

So on top of that, we are a founding member of One Planet Sovereign Wealth Fund Agreement, which is focused on climate change. We utilise SASB accounting practices to look at financial materiality, as well as TCFD as part of our investing framework. And as an asset manager, we publicly urge people to take a look at climate risk on a total portfolio basis and have had climate risk as part of our forward-looking capital market assumptions for years. So obviously, this is something we’re passionate about. Of our 1.1 trillion in assets, we have about 126 billion in sustainable assets and have been on that journey with our clients for over 30 years. And Northern Trust Asset Management has had leadership in not only climate change, but manages one of the largest European ESG funds as well as five of the top 10 ESG index funds globally. And this trend will continue. Plus we just launched proudly on Euronext our FlexShares developed market, low volatility, climate ESG UCIT, and our FlexShares developed market high dividend climate ESG UCIT. So we are off to a respectable start.

Both sustainable finance and digitalisation of the financial industry are pushed by the millennials, and they are becoming an increasingly larger part of the investment community. Having the global financial crisis as part of their formative years, they seem to be somewhat risk averse in many cases. How do investment preferences shift as this generation increasingly enters the market?

“So Nicolas, I wrote a paper on generational investing and found this subject fascinating, and you can ask somebody on my team for it at a later time. The largest transfer of wealth between Baby Boomers and the younger generation is about to take place by the year 2035 globally. And we need to think about how we can serve this marketplace. And a lot has changed on this even since I was growing up, on generational investing. So how young people think about wealth is evolving. Studies say that what is happening at the age of 13 in your life has a lot of influence on the way you view the world and gives you psychographic preferences and informs you on how you view things like risk. So people who are 13 in 2008 have a very distinct view of the world, and that would make them 26 today.

The other aspect is that there’s less limitations on who can be wealthy. You’re no longer required to be at the age of majority to be a millionaire or a billionaire. In fact, there are wealth advisors who specialise in sudden young wealth. Yes, they have people who cover 13 year old billionaires. But the next thing we need to pay attention to is that these younger investors will be voting with their investment monies for things that resonate with their values. And to that end, things like climate change, community welfare, being able to engage in charities where they can actually see the kid who gets the book that they donated and connect to them, ESG strategies, this will be the way of the future. And so we have to pay attention on not only their risk profile and their preferences, but how they engage? Digital is how they choose to interact today. And this affords the financial services industry to deliver digital investment advice along with community engagement online. In fact, there’s an appetite to give to local charities in a scale that young people use through apps. And I’ve seen investor discussions and investors talking about trends on TikTok. So this is about the future, the democratisation of information and money going forward with this group.

You hinted before already at your passion on one issue that I flagged during my introduction of you, and that is the role of women in finance. You have worked in the financial industry for more than 30 years, have been recognised with two prestigious awards as I mentioned before, a Women to Watch and a Top Women in Asset Management award. What changes have you seen during your career in terms of driving gender equality in asset management? And what advice would you give to young women who are looking to enter this industry today?

“I like to believe I’m a talent advocate, and the way you get strong talent is having a diverse portfolio of people that contribute their full self to their job. And I’m also a big believer in legacy, meaning that I personally believe the only way a person can live forever is to clear the way so that the people on your team can go on and do things far greater than you ever could. I believe a piece of you lives through that. So what advice might I have for younger talent? Three things, be willing to take on things that are difficult to do, your attitude will get you far, and humility along with a strong work ethic and willingness to tackle hard challenges will pay off year-over-year. Mentors, you need them for different stages of your career. Early on, you need a cheerleader to say, ‘Hang in there, keep going. You’re doing the right thing.’ to encourage you. But as we get later on in our career, you need people to be a gut check for you for judgment. Did I make that right call? Should I have done something differently?

And as you advance, you need people to teach you how to influence. And one of the best ways to do this is to notice people who are the exact opposite of you, think differently than you do, people who were at the table, who you think, ‘Oh my, they’re just completely differently thinking.’, and you need to get to know them, learn how they think, because the higher up in your career you go, the more you need to influence others who do not think like you do. That’s about being effective.

And lastly, be serious about what really gives you joy. Why are you doing this in your career? Every day, we have challenges and problems in things that we’re working on. And as you get more advanced, you get more challenges and problems, but pay attention. If you really get a kick out of what you do, it will make a difference in your life for the joy you get every day. You’ll be intellectually curious about your job and your career, and you’ll take the right risks.

And before we finish up, let me ask you what is now our traditional last question, which is not on financial services, but on a more personal level. What book have you read recently that you would like to recommend to our listeners?

“I have favorite go-to books for different reasons. And I’ll give you a couple of them. One of my very favorites to your point, Nicolas, about change and managing and navigating crisis, one of my favorite books is Leading at the Edge from Dennis Parkins. It tells of Ernest Shackleton’s story of his Antarctic expedition. And it speaks to the time of crisis and how people need to feel normalcy, responsibility and the role that celebration and tradition plays in this. And that’s an important lens for a leader. Thinking, Fast and Slow by Danny Kahneman, won a Nobel Prize on behavioral finance and economics, talks about judgment and decisions, which is very good for leaders to have. One of my favorite readings is Extreme Productivity by Robert Pozen. It’s a book on habits for efficiency so it’s a quick read on little things you can do to make your days more efficient. And for the people-culture lover, StrengthsFinder. If you’re managing people and you want to magnify and get the best out of them, focus on the things that they do best, that’s one of my favorite books as well.”

Well, all of these, we certainly would do good, all of us reading, especially the one on efficiency. Thank you very much, Marie, for sharing your insights with our audience. And thanks also to our listeners who have tuned in again to our podcast. In our next episode I will be speaking to William Wright, Managing Director of the New Financial, a London-based think tank. To stay up to date with our podcast, please feel free to subscribe on iTunes, Spotify or Google. You can also find more information on our website, luxembourgforfinance.com.