A ‘value system’ is a coherent set of beliefs and attitudes that influences every part of who we are and how we behave. Values are the deepest parts of what make us human, governing how we see the world and respond to it. Values help us decide what is right or wrong, good or bad, normal or weird. And they often work at a level below conscious thought – values help us make those snap judgments when we meet a new person, and they inform our major life decisions such as who to marry, how to handle death and what makes us happy1.
What applies to individuals affects commercial organisations even more so. The very reason why companies spend time thinking and articulating their inner-value systems is rooted in the necessity of describing who they are to others, so that they can build cultural alignment, hire good fits (talent) and create relevancy with and for their clients.
When looking at the asset management industry through the lens of the Responsible Investment Brand Index (RIBITM)2, the picture that emerges is one of an industry that yearns for trust, emphasised by the excellence of services delivered for clients through an innovative and collaborative spirit. Sounds good – but when digging deeper, it is less so: nearly 25% of all asset managers evaluated state the value “Integrity” as one of their core values. This is not surprising, but none the less shocking to some extent. When clients entrust millions of assets to be managed on their behalf, one would think that integrity surely is the equivalent of four wheels on a car – it can’t move without them, however powerful the engine may be. Other industries have long moved on. In other words: why put such a strong emphasis on the obvious?
In fact, the same logic applies to the top 10 values observed within the universe of the 284 largest European asset managers researched in RIBI:
Certainly, all of these values are of importance when thinking in terms of articulating good behaviour. However, and perhaps more importantly, it is striking just how bland these values are. Indeed, for an industry that sits at the lever of money, increasingly driven and regulated to factor in sustainability efforts, such values are of limited use to help asset managers stand out in a very competitive industry, to help investors select their money manager and overall to help the industry advance into the future.
Consider for a second the example of Enron. 20 years ago, the “most innovative company in America” went under on the back of grossly misleading the board as well as the public. Their values? Integrity, Excellence, Communication and Respect.3Values alone do not make for a great company. Paper and PowerPoint take everything and often lack any meaning at all. It is the very reason why, when we are evaluating value-systems as part of our RIBI™ analysis, we consider whether and how value systems are rooted in meaning, driven by a gravitational core that can provide this context – or in other words, a deeply rooted purpose that helps frame this.
In addition, a fact most often overlooked is that well-thought-out value-systems are going beyond behavioural traits and act as a catalyst for differentiation in the marketplace, helping businesses to articulate their competitive edge. We generally look for few and meaningful values of which one is clearly there to help differentiate a manager. When looking at the evaluated universe, only 25% of all 284 asset managers seem to appreciate that competitive differentiation is not a marketing gimmick, but instead needs to be rooted deeply within a company’s cultural setup in order to work.
In our analysis we look for evidence on the following criteria:
In the RIBI™ universe, we have identified only eight asset managers that fully reflect all of these criteria. As an example, we can put forward Aviva Investors: the company’s value system is rooted in a sense of purpose of “bringing it all together for today’s investor”. Whilst the latter is not rooted in societal advancement as such, the value-system to deliver on this promise is however consequent and anchored with “killing complexity, never rest and creating a legacy” – overused and platonic values such as “integrity and excellence” are not present and considered hygiene, making space for externalized differentiation.
More broadly, the investment managers who articulate a value system satisfy our evaluation criteria in the following manner:
What does it tell us? At this stage, there is a bit of a disconnect between the growth of Responsible Investment in the industry (for example as measured by the growth of ESG assets under management vs. overall assets) and the number of managers expressing their societal ambitions through their value system. We can also see room for improvement in the way value systems are constructed as only a minority of them meet the alignment of driving behaviour and action, helping build a corporate culture and connecting with the stated Purpose. The other missed opportunity is for asset managers to use their value system to differentiate in such a competitive industry and to clearly communicate to their stakeholders what they really stand for: less than half of the companies in our panel do this. Finally, a vast majority of the asset managers in the panel concentrate the projection of their identity through no more than 5 values. Actually, we recommend being even more focused: when we advise clients on their brand, we argue for three, maximum four, values (more bears the risk of diluting the message).
Brand values are the guiding principles that drive your brand’s internal culture and create – through at least one clearly differentiated value – an external connection with your clients. Clients are increasingly seeking more from a brand than products. They want to feel a connection to a brand as something they can relate to. We call this shared value systems – and indeed, other factors being equal, 64% of people say that sharing the same values with a brand is the primary reason they have a relationship with a company in the first place4. It is by far the largest driver of creating new business opportunities and keeping clients loyal. Or in the words of Howard Schultz, CEO of Starbucks: “If people believe they share values with a company, they will stay loyal to the brand.” It is perhaps worth remembering his advice in the context of the competitive landscape where your clients have more than 63’000 funds and 4’400 managers to choose from in Europe alone. Even more so, when they want more and more to take their inner societal beliefs into account when they invest.
May 2021, by Jean-Francois Hirschel and Markus Kramer
1. The Guiding Purpose Strategy, A Navigational Code for Growth, Markus Kramer, Clink Street Publishing, 2020
3. Source: http://www.nytimes.com/2002/01/19/opinion/enron-s-vision-and-values-thing.html
4. Source: https://hbr.org/2012/05/three-myths-about-customer-eng
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