In episode 5 of the Let’s Talk podcast, host Sally Yates speaks to Sarah Eng - FundApps Regulatory Expert, equal rights advocate and ex-compliance officer.
Learn how diversity can influence investment decisions, why it’s important for decision makers to feel staff pain points, and which area of investment management Sarah thinks is a ‘squishy space’.
And of course, find out what she’d banish to Room 101.
Let’s Talk: Episode 5 with Sarah Eng at FundApps
Sally Yates: Welcome to another episode of Let's Talk, the podcast sponsored by FundApps, the compliance monitoring and reporting specialists. This season we are talking tech. How is tech future-proofing financial services? What have we learnt and what do we seem to never learn? As well as talking tech this season, in each episode we get to know our experts on a more personal level and get them to share a bit about their pet hates and what's on their wish list. It's time to meet today's guest. I'm Sally Yates and I'm your host on Let's Talk. Welcome to today's episode of Let's Talk and today we are joined by Sarah Eng who is one of our very own FundAppers. Welcome Sarah.
Sarah Eng: Hi, good to be here.
Sally: Let's start off by hearing from you in a few sentences a bit about your background.
Sarah: I came to investment management accidentally coming out of undergraduate school. I was looking for a job and ended up temping at an investment management firm and the rest is history from there. I moved up through operations into some IT roles and eventually towards the end of my career ended up or the end of that phase of my career, ended up working in compliance, doing shareholding disclosure, and then I came to FundApps.
Sally: Brilliant. That explains the journey. Let's start with the asset manager lens. From your experience, having worked both sides of the fence, how has the role of compliance, both as a function and for individuals changed in the past decade and what would you say were the key drivers behind that?
Sarah: One of the things I've noticed over the last few years is an increase of interest from individual and institutional investors on ESG issues, so environmental, social, governance. Socially responsible investing as it's been called has been around for a while, but the big increase has been the widening of that interest beyond individuals and their investment guidelines for their individual portfolios to an increased focus on those areas from institutional investors. Wanting their asset managers to be able to answer some tough questions on those topics and align their investment portfolios with their values.
Sally: Yes, we've heard that from some of our other guests, that ESG is definitely not a new thing in the industry, but has definitely moved up the agenda and obviously now it has more of a label, whereas the industry's actually been doing a lot of the things already just under another guise really. Obviously, this season we're talking about technology and you are now sitting on the technology vendor side of the fence, so a bit of a change for you. If you reflect back, what advice or counsel would you give your previous asset manager compliance self when it comes to the adoption and maybe the speed of adoption of technology?
Sarah: My biggest piece of advice I think would be to never get too comfortable with your existing vendor, because the landscape changes quite a bit. Something that was fit for purpose for you five years ago might not be the best tool for where you are as an organisation, where the regulations are, what's required out in the world, and what's available to you in terms of alternative vendors. Performing that due diligence, not just on the initial acquisition side, but routinely, periodically doing a sense check within your organisation, talking to the people who actually use the product, how it's working for them, how it's not, and just being mindful and being open to change.
Sally: Yes, that makes sense, doesn't it? You need to understand even if you've got a current vendor, what their vision is for the product. How are they future-proofing your compliance?
Sarah: Exactly. What's their roadmap for the future, and does it align with yours?
Sally: That makes perfect sense. As you say, you've been in the industry for a while. What do you think the industry keeps forgetting to do?
Sarah: Speaking to asset management, they keep forgetting to hire women and promote them. That's a little cheeky answer, but it's true. The gender imbalance in investment management is pretty stark and we're not taking advantage of potential new sources of talent. I think there's a 10% something, 10 to 11% of funds are managed by women.
Sally: I hadn't appreciated it was quite that low. There's obviously lots of surveys out there as well, aren't there? That actually points to the greater diversity, and the greater mix you have in everything from the boardroom and throughout actually increases the performance and improves the performance of different businesses. As you say, missing out. What would you say is maybe a way forward that the industry can look at to try and make some of those changes?
Sarah: I think widening the lens of your pipeline of potential candidates. We tend to be stuck in a very narrow lane of going to this small set of graduate schools and having these internships in your background. Realising that those are convenient indicators of someone's potential, but they're lazy, in that you can look a little harder and a little bit wider and just spend time investing in recruiting people and sponsoring and promoting them once you've got them in the front door.
Sally: Obviously other women, the more that they see women that are in the industry and are actually forging a strong career in it, and finding that acceptance, I think again, that helps to open the doors and encourage people to consider it.
Sarah: Exactly. If you see something, you can be it.
Sally: Yes, exactly. I'd imagine as you say, you fell into the industry, it probably wouldn't have been on your radar otherwise I'd imagine.
Sarah: It wouldn't at all. That's another good point, is that we tend to have conversations about money and management and asset management with our sons in the family, and with boys, and it's not something that young women are brought into the conversation in very often. Having the role modelling out there to welcome them in, and then encourage that participation and foster it.
Sally: Yes, absolutely. Say baby steps, more to be done. Positive thinking, and hopefully we'll get back on track. Let's talk a bit about regulations and the regulators. We see this a lot at FundApps where we can see that one firm's interpretation of a regulation can be completely different to another's, and it's a bit of a dark heart maybe, that sort of interpretation of what the regulation is actually asking. From your perspective as a regulatory expert, what are the regulators increasingly focusing on?
Sarah: One thing that we've seen a lot in recent years is a focus on foreign direct investment, and states trying to put limits on incoming investment from foreign actors. Unfortunately those are not yet very well defined guidelines in any way yet, so it's a very squishy space. It has a lot of people somewhat anxious about, of course, no one wants to inadvertently breach any restriction, but people writing these regulations aren't necessarily the folks like us, or like my past self who are in an operational role and are looking at some text. I'm like, ''Okay, what do I do with this? How do I act on this? How do I protect and avert risk for my employer?'' The lack of clarity there in FDI is a challenge.
Another focus we're seeing from regulators has been similar to what we're seeing from investors in that focus on ESG. The SEC has some new guidelines they've put out for requiring issuers to disclose more, or publicly listed companies to include more of those kinds of metrics in their reporting. Increasing transparency there so investors can make good choices. Just in general transparency, Increasing transparency is a big one.
Sally: I'd imagine that's a road that they will continue to keep going down. Are there certain jurisdictions or particular types of regulations that you find that are more problematic to gain that understanding around and what are those?
Sarah: Yes, if I've noticed a theme, especially upon coming to FundApps and being surrounded by other experts, which is, it's been delightful for me to have conversations with, because this is very much a niche area shareholding disclosure. To have deep dives into what people think of other regulations and how they interpret them. The one conclusion I've walked away with is that people tend to think that their home jurisdictions rules make the most sense and everyone else's are a little bit puzzling. The grass is always more understandable on your side of the fence, if I can bludgeon that particular saying.
Personally, I'm a big fan of the EU transparency directive. If one can have favourite regulations that would be up there. The idea of mutual recognition across borders and some consistency with the way we treat. Is this in scope? Is this not in scope? Let's include these kinds of financial instruments, and the responsiveness to change. The TDA incorporated cash settle derivatives in the amending directive where it hadn't before. I appreciate that level of cooperation and consistency. Again I'm also very, very familiar with the US regs and talking to people who do not typically disclose those. From their perspective I can see that those requirements can be pretty confusing. The 13G, 45 days after quarter end, percent of class. It's the regs you know are the ones that are the easiest to understand.
Sally: That makes sense. We've already touched a bit upon the fact that we work in a very much a male-dominated industry and you said that there's only 10 to 12% of women running funds. From your experience, what has the industry already gained from having women in the industry? What change have you seen that's made a difference?
Sarah: I don't have statistics on this, but I think you're opening up your potential customers, you're reaching a bigger pool of customers. In terms of what the industry gains from having more women involved in asset management, I'd go back to the idea of the talent pool first of all. The idea that if you increase your talent pool, you're increasing the possibility of really outstanding performers and superstars in that pool, and you can select from them.
On the flip side from the investor standpoint, speaking for myself, I am a woman, I have money to invest, and if I'm shopping around for a fund or an investment advisor, I'd like to see someone who maybe shares some of my values and interests and concerns. I'm more likely to find that in a marketplace where more of the vendors or more of the asset managers share some of my background, and we haven't had a lot of choice in that regard in the past. Not to say I wouldn't trust someone who doesn't look like me with my money, but women have longer lifespans, different time horizons for investing. Having more people in the room with diverse experiences and diverse expectations can change the investment decisions you're making in the room. We just want the best talent possible and we get that by inviting talent in.
Sally: That makes perfect sense. As you say you're going to feel more comfortable if there is some level on the other side, and as you say, from an investing perspective also brings a different lens, a different challenge, A different view of what might work, what might work better. I think as you say, previously it was fine, but I think things are moving forward and there are different expectations now. It is about reflecting that as you say, to capture a wider investor audience and wider talent pool. That makes perfect sense to me Sarah. Obviously, you've worked with a whole variety of characters throughout your career. Is there any particular piece of advice or story that comes to mind that you think has really helped to speed up the adoption of technology in the industry at all?
Sarah: In my experience, The biggest driver of adoption is seeing someone else take the risk first and talking to your peers in the industry and learning from each other's experiences with regulators, with vendors. Really appreciating the value of a community, some characters. We tend to get very personal about our tools and very attached to what we know.
I think as important as it is to have experts in any organisation, it's also important to make sure that the people who are in decision making roles, above those people that are using the product genuinely understand the pain points that their staff are experiencing, how they can help, and what to look for. We talk about vertical aggregation and shareholder disclosure, but there's also this vertical knowledge shared within an organisation of the tools you're using in the technology that would most benefit your organisation. Making sure that the top tier, the decision making tier is talking in the trenches tier, I think is the link that can get missed.
Sally: That makes sense, like you say, they will never experience the pain of all the different things you have to know to be able to make a shareholding disclosure. Some of it is you don't know what you don't know, so you can't challenge it.
Sally: The people that are day-to-day are like, "Oh my God, you didn't ask that. Why didn't you ask that?" That's really fundamental and important.
Sarah: Again, it goes back to you having people in the room making the decisions. Inclusion at all levels.
Sally: Let's change it up a bit and move away a little bit from talking about the actual industry itself, and pivot and talk a little bit about you, find out about you a little bit more. We're going to start off with the concept of Room 101 and for our listeners who are not familiar with the concept Room 101 was a BBC series where celebrities, and today's celebrity is Sarah, get to throw away their least favourite things, their pet hates, their worst nightmares. Why is it called Room 101? It's thanks to George Orwell who once worked at the BBC in a very desolate sad room and he put that experience into his novel 1984. Sarah, what would you propose to put into Room 101?
Sarah: Well, Sally, you're tying the timing of this question. I would probably not have answered this the same way a month ago, but we have just turned the clocks forward in the US and it reminded me that I hate daylight savings time. I would put daylight savings time in Room 101. We would never touch the clocks again, just trust the sun and the turn of the earth to tell us when it's time to wake up. My team can tell you that I have an annual rant on daylight saving, and I'm going to share it with the world right now.
Sally: Does it happen twice a year? Or is it just twice going forward?
Sarah: I hate both. I hate the turning forward and the turning back, because they're both very disruptive, but I'm a morning person, so I especially hate turning them forward.
Sally: That makes sense. Obviously, I think other to go alongside that is the fact that Europe and the US don't even do it at the same time either. We play these like guess the time for a few weeks either end as well, so we don't need that little shorter season experience either. I think that's fair enough, we can put that into Room 101. Do you have a good analogy about banking or financial services that you could maybe share with the listeners?
Sarah: My favourite analogy is specifically related to shareholding disclosure, and active versus passive investing. It's one that I made up for training a while ago and it seemed to stick with people. The idea of a soccer field or a football pitch, with the market participants being the players on the field and then parents on the sideline being the investors. The investors who are just happy to be there to watch the play, hope their kid scores, but they're not interfering, those are your long-term investors who are eligible to file 13Gs because they have no intention to change or control management of the issuer.
The activist investors are the parents yelling on the side-lines, telling the coaches what to do, yelling at the refs, trying to get the coach thrown out. Those are your 13D type investors who have to file much more odious paperwork because they are trying to change and control the outcome. So yes, parents on a football pitch.
Sally: That's a good one. I have not heard that one before, because obviously it's come from the original source. I think we can definitely use that one again. What's top of your bucket list?
Sarah: Oof. I love to hike, I would love to see Machu Picchu one of these days.
Sally: Hasn't that had some restrictions on it now because it's got too popular or something?
Sarah: It has. I think my moment may have passed, my window of opportunity, but I wouldn't switch to Everest or anything, I'm not that ambitious.
Sally: No, I think Machu Picchu is a good one. I still think it should be an ambition. If you could be a fly on the wall and listen in to anyone's conversation past, present, or future, who would you choose and why?
Sarah: I would love to be in a rehearsal room of something like Yo-Yo Ma working with an orchestra. Just to hear the rehearsal process and see it, and having kinks worked out, and perfecting things, and really just getting a glimpse of the genius behind the scenes. I'm a process stud, so as much as I enjoy sitting out in the audience and watching a very nice and tidy wrapped up performance, I really like the journey to getting there.
Sally: I like that, as you say it gives you a much deeper understanding as you say of that genius. Fantastic. Obviously you are a FundApper Sarah, so you are more than aware that we're a B Corp, and it's very much a part of our DNA. It's the good people, good ethics, good business concept which is very much woven through our whole day-to-day here at FundApps. What does that mean to you personally, and how do you think it plays into future-proofing business?
Sarah: I wasn't familiar with the B Corp concept until I started learning more about FundApps. I liked it because it really aligns with my personal philosophy of leaving things better than you found them. Whether that's a campsite, or an interaction with a person, or a really arduous shareholding disclosure process. It's a very simple idea that everything you do has an impact. Yes, there may be revenue and profit to be had, but that is not the only measure of your impact and the results of your actions.
In terms of future proofing your business, I think one of the key B Corp principles about good people and good management is a huge driver in terms of if you treat people well, if you treat them fairly, if you give them a mission to believe in, you will attract and retain top talent. That beyond technology, is in my opinion the biggest key to future proofing your business, is to futureproof the people that make it.
Sally: Make sense. They say that people walk out the door every evening, and those are your biggest assets, and you want to make sure that they come back in, that they're bought in, they're invested in what they're doing for sure. It's been an absolute pleasure talking to you today Sarah. Thanks ever so much for joining us and we look forward to you coming back again in a future episode.
Sarah: Thank you.
Sally: Thank you to everyone for tuning into this episode of Let's Talk and we look forward to welcoming you back to another episode. Past and future episodes are easy to find on the FundApps website at fundapps.co, and please don't forget to subscribe either on the website or whichever channel you listen to your podcasts on. We also want to hear from you, our listeners, so if you've got any suggestions on what you'd like us to talk about in this or future seasons, get in touch at email@example.com.
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