‘Good leaders create followers,’ said the late philosopher and theologian Jonathan Sacks, ‘but great leaders create leaders.’

Sacks had a lot to say about leadership and, although writing in a more religious and ethical context, it is worth repeating a couple of his other sayings. ‘Leaders learn,’ he said, referring to the amount they read. And leaders ‘believe in the people they lead’.

Leadership is very much needed in asset management. The industry has endured a tough time of late, reflected in the sharply declining share prices of quoted groups as my friend and colleague Richard Lander pointed out in his recent Citywire Amplify analysis. Of course, these drops in share price are an inevitable consequence of falling markets and asset classes. As one CEO said to me this week, the impact of falling markets trumps any gains in net inflows. Headwinds abound but it is often the tough times that inspire leaders to come out with their best work.

Where are the areas in asset management that require the most leadership now? Here are a few thoughts.

Sustainability

Sustainable investing, the transition to net-zero, ESG; call it what you like, this field is crying out for leadership. The jamboree of sustainability taxonomies globally needs leadership to create some useful commonality for asset management groups.

In this context, I recommend at least skimming the recent report from the Australian Sustainable Finance Initiative, which gives a very useful overview of taxonomies from the UK, Canada, the EU and others.

The other area here that requires leadership is in the US, where ESG has become a political issue. Some US states, such as Florida and Texas, have threatened boycotts if asset management companies are seen to be excluding investments in fossil fuels.

Asset managers cannot be Janus-like (the Roman god, not the fund manager) facing off in different ways depending on whether they are dealing with a pro- or anti-ESG client.

It seems to me that if you keep your clients’ interests at the centre of everything you do and you have deep communication with your client as to their needs, then as an asset management leader you will not go far wrong. Understanding that sacred duty of looking after the pensions and savings of billions of people, rather than grandstanding about your sustainability credentials, is the way forward here.

Regulators, as well as asset management leaders, need to be visible here. It surely cannot be right for custodians of pension fund money to be making politically driven investment decisions.

Regulation

Asset management has been a follower, not a leader here, with regulation striking at the heart of what the industry does. When I say this, I mean the way that regulation is now focused on investment performance.

In Australia the Your Future, Your Super regulation forces the giant superannuation funds to report on their investment performance each year and if they fail the tests set by the regulator for two consecutive years they are banned from taking on new clients. The rule has been paused for review, as it can have unintended investment consequences, but the trend is clear here.

In the UK, funds must report whether they have been providing value for money each year and demonstrate what they are doing to improve if they are not.

If you look back over the past couple of decades, it is easy to see how regulation has squeezed asset management, in some cases getting rid of practices that were clearly not in clients’ interests – inducement rules and restricting commission payments are two areas that spring immediately to mind. And I can understand the temptation not to change highly profitable ways of operating until required to do so.

But in writing this, I think of a true leader who has created leaders, who was ahead of the game: Jack Bogle of Vanguard, the company he founded.

That said, this is not one-way traffic. Asset management leadership should stand up to regulators and point out where the regulation has gone too far, absorbing far too much time and creating unnecessary reporting and expense.

Diversity

The genie is out of the bottle. Diversity is vital. Diversity is right. Diversity is good for your business. The asset management industry has grasped this issue and is showing leadership.

But the fact remains that according to Citywire’s Alpha Female Report, only around one in 10 front-line fund managers is a woman and the change in this metric has been glacial over the seven years we have been publishing this data.

We have given our data to several US gatekeepers who have signed a pledge to ensure that every search has to include at least one diverse candidate. There is more to be done in this respect.

Mental health

This is another issue that is not specific to asset management but where a lot of leadership is required. To work in an industry where your performance is measured publicly every day is tough.

Many years ago, Quilter CEO Paul Feeney revealed in a Citywire interview that he was struggling with his mental health and subsequently elaborated on it at one of our conferences. That inspired me to be open about my own experiences – I burned myself out many years ago when I was a journalist at The Times.

My erstwhile Citywire colleague Ollie Smith made films and wrote articles on mental health in his own life and in the finance industry that won him a Personal Finance Society award at a very young age.

The famous psychotherapist Viktor Frankl once said that a certain amount of stress is important in daily life. But leaders must create an atmosphere where there is no stigma to being open about mental health and put in place appropriate practices that balance the commercial and human imperatives.

Efficiency

I hesitated to put this down as it sounds almost administrative compared with the grander issues above. The fact remains that vast swathes of asset management have been inefficient until relatively recently, as it has not had to be any better given the impressive margins it generated.

Three years after we founded Citywire, I was at a meeting with the CEO of an asset management group and his marketing director. The marketing director picked up a copy of one of our magazines, which his company already advertised prominently in, and said: ‘Does anyone read this?’. I was not surprised to see a few months later that he had been pushed out.

In a recent interview, Liontrust CEO John Ions talked about their internal mantra of ‘relentlessly focusing on the basics’, which would provide a competitive advantage because most of the others do not. Nowadays, decisions must be evidenced by granular and useful data, which groups collect, analyse, and have easy access to.

As a spectator on asset management for 30 or so years, I can see the inexorable progress being made towards accountability, responsibility, better systems and so on. It is the right direction (although none of this should be an alternative to creativity and flair). And the margins in asset management remain impressively high compared with industries like groceries (Tesco 3.7%), fashion (Next 17%) or even defence (BAE 10%).

Finally, maybe we should all remember Harry Truman’s famous saying: ‘It is amazing what you can accomplish if you do not care who gets the credit.’