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By  Sébastien Page

The Psychology of Leadership in Investment Management

Five ways to become an effective leader in money management

September 2024 -

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.

 

Sébastien Page Head of Global Multi-Asset and CIO

Sébastien Page is head of Global Multi-Asset and chief investment officer. He is a member of the Asset Allocation Committee, which is responsible for tactical investment decisions across asset allocation portfolios. Sébastien also is a member of the Management Committee of T. Rowe Price Group, Inc.

By  Timothy C. Murray

Additional disclosure

CFA® and Chartered Financial Analyst® are registered trademarks owned by CFA Institute.

IMPORTANT INFORMATION

This material is being furnished for general informational and/or marketing purposes only. The material does not constitute or undertake to give advice of any nature, including fiduciary investment advice, nor is it intended to serve as the primary basis for an investment decision. Prospective investors are recommended to seek independent legal, financial and tax advice before making any investment decision. T. Rowe Price group of companies including T. Rowe Price Associates, Inc. and/or its affiliates receive revenue from T. Rowe Price investment products and services. Past performance is not a reliable indicator of future performance. The value of an investment and any income from it can go down as well as up. Investors may get back less than the amount invested.

The material does not constitute a distribution, an offer, an invitation, a personal or general recommendation or solicitation to sell or buy any securities in any jurisdiction or to conduct any particular investment activity. The material has not been reviewed by any regulatory authority in any jurisdiction.

Information and opinions presented have been obtained or derived from sources believed to be reliable and current; however, we cannot guarantee the sources' accuracy or completeness. There is no guarantee that any forecasts made will come to pass. The views contained herein are as of the date noted on the material and are subject to change without notice; these views may differ from those of other T. Rowe Price group companies and/or associates. Under no circumstances should the material, in whole or in part, be copied or redistributed without consent from T. Rowe Price.

The material is not intended for use by persons in jurisdictions which prohibit or restrict the distribution of the material and in certain countries the material is provided upon specific request.  

It is not intended for distribution to retail investors in any jurisdiction.

202408–3752004

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