Taking high road to investment gains

Investing is well known for having countless metrics, but let’s face it: Adviser morality and integrity were never up there with capital gains or yield.

Investing is well known for having countless metrics, but let’s face it: Adviser morality and integrity were never up there with capital gains or yield.
Findings of a study commissioned by Minneapolis-based Ameriprise Financial Services Inc. and released last week may change all that.
Advisers who demonstrated “high levels of moral and emotional competency” outperformed the Standard & Poor’s 500 stock index by 10.4 percentage points from 2001 through 2004, the study asserted. It also found that among “behavioral competencies,” integrity “had the strongest impact on positive client returns.”
“Integrity” was defined as “advisers’ acting consistently with what they said was important.”
“We now have hard data that we can use to support [the] benefits of being morally and emotionally competent,” said Dr. Rick Aberman, a psychologist and founding partner of Lennick Aberman Group, a Minneapolis-based consulting firm that worked on the study as part of the Boston Mass.-based Consortium for Research on Emotional Intelligence in Organizations.
A white paper of the study is available at lennickaberman.com.

How much is enough?
Hard as it may be to believe, Wall Street is worrying about retaining junior talent despite compensation packages that would be considered more than generous anywhere else in the universe.
Bulge-bracket firms are shelling out around $70,000 a year in salaries for entry-level analysts, plus bonuses ranging from $65,000 to $95,000, according to a column by Liz Peek in The New York Sun last week.
So why exactly is there a retention problem?
For starters, an anonymous analyst told her, “the work is mind-numbingly boring.” But the real culprit, she reports, is the lure of working for a private-equity firm, where the upfront pay may be less, but potential exists for participating in a deal and sharing in a firm’s profits.
Investment banking, according to the analyst, “is becoming a commoditized industry, and less rewarding — even at higher levels.”

Developing decline
Emerging markets are all the rage, but interest in developing countries may be cooling off, the Washington-based World Bank warned in a report released last week.
Direct foreign investment in developing countries, fueled by a series of mergers and acquisitions, reached a record $325 billion last year, according to the bank. Foreigners bought $94 billion more of emerging-markets stocks than they sold, a 40% increase from the $67 billion of net purchases in 2005, the report stated.
However, the report noted that 2006 may have been a peak in the global economic cycle and said that a slowdown is expected in growth in developing countries to 6.7% this year, from 7.4% in 2006.
Mansoor Dailami, the report’s lead author, cited “overheating” in some emerging markets in an interview with The Wall Street Journal.
“Whether the authorities have the right macroeconomic measures to ensure a soft-landing scenario is a very important question,” he said.

Rethinking retirement
Another economic cautionary note was sounded last week by the Paris-based Organisation for Economic Co-operation and Development which warned that the impending retirement of baby boomers in the United States may slow potential growth in the coming decade.
A survey of the U.S. economy by the OECD found that a steadily declining number of workers will impede growth, and the organization urged the U.S. government to pursue policies aimed at slowing down the retirement rate.
For example, the OECD recommended that workers not receive full retirement benefits until age 67 and that the retirement age be raised still higher.