by Noriyuki Morimoto
Professionals are individuals who ensure the quality of their service by dedicating their work to their clients, always striving for self-improvement and investing all of their abilities in their expertise, given that the outcome of their service is impossible to be guaranteed. While such professionalism is represented by lawyers, accountants, and doctors, those involved in asset management must also be professionals, as the outcome of their work also cannot be guaranteed.
In medical practice, the choice of any treatment method entails, to varying degrees, uncertain risks to the life of the patient. Both the choice of litigation tactics by lawyers and the investment decisions of asset managers carry risks that can affect the outcome. Essentially, professional judgment is a bet.
Professionals also form organizations. In the decision-making process of an ordinary organization, small bets, i.e., decisions that entail minor uncertainties, are transferred to the lower levels, while large bets, i.e., decisions that entail major uncertainties, are kept at the top. In other words, management is ultimately responsible for the bet.
In a professional organization, responsibility for the bet is not transferred to its higher layers. In medicine, litigation, and investment, responsibility for results is not absorbed into the upper echelons of the hospital, law firm, or investment management firm, but belongs to the individual professional to the fullest extent.
However, many investment management firms operate under the illusion of organizational decision-making, where individual professional bets are replaced by misguided consensus-building, based on common-sense reasoning that reaches the same conclusion no matter who is doing the work. This approach lacks individuality and fails to create added value.
In real asset management, what organizations should do is not to bet on uncertainty themselves but merely to set various constraints on the betting activities. Picking stocks should be the exclusive responsibility of the individual professional in charge, and while the organization may approve the selection, it has no way of selecting the stocks. The stock selection is solely a personal decision and a personal bet.
Unless bets are based on individual professional responsibility, there will be no individual growth or outstanding performance. If you are working in asset management, are you making your own bets?
[Category /Investment Professional]
Chief Executive Officer, HC Asset Management Co.,Ltd. Noriyuki Morimoto founded HC Asset Management in November 2002. As a pioneer investment consultant in Japan, he established the investment consulting business of Watson Wyatt K.K. (now Willis Towers Watson) in 1990.