The Psychology of Leadership in Investment Management

Transcript

So the financial industry is obsessed with numbers. We hire people who are good with numbers. We tend to promote those who are very good at using their methodical, logical left brain. But what about the psychology of money management and financial markets? And what about the psychology of people management?

I'm Sébastien Page, head of Global Multi-Asset and chief investment officer at T. Rowe Price. I wanted to give you five ways you can go beyond the numbers to become an effective leader in money management.

First: Focus on your process. So I'm encouraging you to ask questions such as, very simple: Should we change how we run meetings to be more efficient? Can we improve how we interpret financial and economic data? How do we maximize collaboration to get the most out of every team member?

Second: Prioritize time spent to maximize engagement. This is what psychologists call a state of “flow.” One of my colleagues, David Giroux, he's very good at using the most powerful word in time management, and that is the word “no.” By saying “no” as often as necessary, David can organize how he spends his time to be most often in this state of “flow”—by taking on tasks that are not too easy so he doesn't get bored; or the tasks are not necessary or too difficult, so those are impossible and he might get discouraged.

Third: Embrace the mission. In money management, we don't talk enough about our “why.” Why are we doing all of this? Portfolio managers want to make money for their clients. They work to give people a better financial future to help them pay bills, to enjoy an earlier retirement, to send their kids to college. That's why we do all of this.

Fourth: Manage biases. Portfolio managers, like everyone else, have biases. For example, it's been shown that those who have gone through a major financial crisis tend to be more conservative compared to those who haven't. That's just an example of bias. My point is, investment leaders must identify, discuss, write down, and manage biases in decision-making.

And last but not least: Know your team. Personalities matter in investment management. You may have team members who are value investors, but you might also have portfolio managers that are growth investors. Is there a superior style of investing? No, not at all. Both are good. It depends on the portfolio manager’s personality and their skills.