Common sense a prime ingredient for research

Piers Bolger
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Piers Bolger … ‘you need both an investment and a moral compass’

Piers Bolger, the head of research and strategy at BT Financial Group, says you need both an investment and a moral compass to capture the opportunities from market cycles. And after more than 20 years as an investment specialist, he has seen a few cycles. He speaks with Greg Bright.

Piers Bolger has seen all sides of the investment world since joining the industry in 1991, during the recession we had to have. He started as an analyst at the old State Trustee of Victoria and then moved to the then independent planning group of Wilson Dilworth and, after its takeover, to the research arm of Lonsec in the late 1990s. The 1990s presented several cycles.

“The recession of ‘91 was an interesting time from the markets’ perspective,” he says. “We had seen most of the big economic reforms of the Hawke-Keating Government. The sharemarket crash was then followed by a property boom and slump and then the recession. Then in 1994 we had the bond market crash. For investors, in ‘94, with old-style capital protected products, they learned first hand that you could have a big negative return from bonds.”

The question now, with the knowledge of history, is where are we at the moment in the cycle? “I don’t subscribe to the view that it’s the same as ‘94,” Bolger says. “But we could be in for some losses [from bonds].”

After the bond market crash the share market went into overdrive in the second half of the 90s, aided by the tech boom and interrupted briefly by the Asian currency crisis. Then, inevitably, there was the tech market crash.

Bolger says that when analyzing a cycle to take advantage of it you have to ask yourself whether your strategy intuitively makes sense. Is it logical? Can you explain how it will lead to a particular outcome?

“In the tech boom, a number of companies were bought on a price-to-sales basis. That doesn’t make sense… But in the end you just make a call.”

With the assessment of managed funds for the BT advisors, the Westpac private bank and wider branch network, which he now oversees with a relatively big team of 17 investment staff, the key issue is their likelihood of “blowing up” and the investors suffering material loss. But every fund manager will go through a time of underperformance.

“Common sense is important,” Bolger says. “Research ultimately is about dealing with individuals and making calls. They are the same principles whether you are looking at retail managed funds or institutional mandates.”

After Lonsec, Bolger moved to IWL, which had enjoyed its own time in the sun during the later stage of the tech boom, but suffered after the split between star manager Anton Tagliaferro and the major shareholder, Otto Buttula. Bolger then joined Frontier as an asset consultant for his first taste of the institutional part of the industry. This was followed by another institutional role, as head of investments for UBS Asset Management.

Bolger’s team’s clients are the bank financial planners, both at Westpac and St George, the two IFA dealer groups – Securitor and Magnitude – and the private banking advice network. So, there is a wide range in the experience levels of each segment of his client base, which he has to cater for.

“We need to be aware of who is our audience and who we are there to support,” he says. “I think of my role as an internal asset consultant. When we look at a product we don’t think ‘this is great, I love it’, we ask ourselves ‘where can we put this into a model portfolio’.”

BT provides “all sorts of materials” for its advisors and other staff. It holds lots of professional development days and, increasingly, webinars, as well as pumping out old-fashioned product profiles.

Even 20-year veterans of the advice industry may struggle to understand certain products, such as a derivatives-based strategy. Bolger believes that financial education is an industry-wide issue, for which all participants have a responsibility. The world is getting ever more complicated.

“When I first joined the industry, the regulatory side was not very tight, but we now have a high level of oversight. And that’s good. But the thing I find most interesting is the dynamic of the products. In the 90s they were really plain vanilla. There was no credit, no high yield, no emerging market debt or even emerging markets equities. The markets have evolved and investment products too.”

Bolger’s team analyses about 60 manager strategies and attends about 300 manager meetings a year. It covers eight asset classes. The BT advisors are also able to draw from research from Zenith. These days, BT is very open architecture.

“If a manager comes to us, or we seek them out,” Bolger says. “We ask ‘are you bringing something to the table that we don’t already have?’ Are we seeing them because it’s a new fashion?”

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