Mr. Wöhrmann, this is your last interview in the CIO View – from December 1, 2015, you will devote yourself to Deutsche Bank’s German retail business. So let’s take a step back from day-to-day issues and get personal. Why did you take this step?
I always relish a personal challenge and I also believe that the German retail business offers the biggest upside potential within Deutsche Bank. This is the business segment where we can and must offer a much wider range of products and services to our clients, and this is where new technologies will require the greatest changes to how we do business. It is a very challenging task to satisfy our clients’ needs on information and performance, which have changed markedly in the digital age, and requires a more individually customized but at the same time cost-effective product offering.
What exactly do you want to change?
For German retail clients, I want to enable them to improve the risk-return profile of their portfolios by reconsidering their investment behavior and approach to risk. It pains me that Germans are still holding 40% of their financial assets in cash and bank deposits and only 13% in equities and equity-like securities. And it is also painful that, as a result, most of them are left on the sidelines when the DAX rallies. Particularly in such times of extremely low interest rates it is paramount to dispel the German fear of business-related investment and the associated risks – the real risk is the loss of value of their cash holdings! Another of my objectives will be helpful here: providing our German retail clients with greater access to the wider expertise assembled elsewhere in Deutsche Bank.
You – just like your successor Stefan Kreuzkamp – started out in the fixed-income business. How did you learn to appreciate equities?
That wasn’t difficult. When I joined DWS1 in 1998, I wanted to become an equity-fund manager. But the only vacancies were in fixed income, so I started there. And the broad expertise within the platform made it much easier for me, more than a dozen years later, to take over responsibility for other asset classes.
What would you like to tell your successor?
First of all, he is taking over a well-ordered business unit, a compact and efficient investment platform which he himself has helped to establish. Additionally, I would encourage him to continue putting his faith on experts in each asset class. Otherwise, there is a risk of merely following trends instead of anticipating them. Even in an environment which remains overshadowed by central-bank policies, stock and bond pickers have carried the day in Europe. They will become even more important as soon as the central banks’ influence starts to fade. In order to be able to provide this added value – i.e. alpha, market outperformance – these experts need some leeway. The executive team will need to use both their professional and interpersonal skills to maintain an environment where this can happen. Finally, I would like my successor to be hard-headed enough also to take unpleasant investment decisions – which I am sure he will be.
Capital markets are generally considered to be efficient. What do we need fund managers for?
The internet provides everyone with almost all data in real time today. Headlines can move markets in the twinkling of an eye. But the right interpretation of data can still help to beat the market, since the investor herd does not always move in the right direction. Moreover, particularly opaque or illiquid markets give investors a further chance to generate excess returns. The same holds true for an intelligent combination of strategic investment and tactical trading.
What added value can average German earners expect from their bank’s wealth managers?
First of all, targets and restrictions for wealth building must be defined together with the client. The next step is the formulation of a tailor-made capital allocation. If these two steps are taken with reasonable care, more than half the job is done. Selecting the right financial instruments and the tactical allocation should then be a more straightforward undertaking.
How can advisers’ and clients’ priorities be better attuned to each other?
Long-term relationships are mutually beneficial also in retail banking. Additionally, we want to increase not only our own advisory skills but also our clients' capital-market expertise to enable them to better judge the opportunities and risks of different asset classes.
Imagine a German 30-year-old and a 60-year-old approaching you with 50,000 euros. What would you recommend?
Although individual circumstances would need to be taken into account, generally speaking, I would expect the 30-year-old to invest in a higher proportion of riskier assets – i.e. a mix of equity and corporate-bond funds, supplemented by alternative assets. For investors who want to build up wealth, I might recommend share saving schemes. The typical 60-year-old may likely be more focused on wealth preservation and regular payouts, so that the share of bonds should be higher. Both would be well advised to hold a percentage in cash and gold – as a risk hedge and for short-term opportunities.
I would advise everybody to take time to think through their investment priorities. Although money may not always buy happiness, as the saying goes, a sufficient financial cushion will at least help you to approach old age in a much more relaxed mood.
Asoka Wöhrmann and Stefan Kreuzkamp
Asoka Wöhrmann joined DWS1, now a part of today’s Deutsche AWM, in 1998. Over the following years he has had to respond to two stock-market crises and the slide of government-bond yields into negative territory. The two stock-market crises reinforced German savers’ skepticism about stocks, with their preference for fixed income resilient to increasingly meager yields. In his new role helping run Deutsche Bank’s German retail-banking operation, Asoka Wöhrmann intends to promote a better understanding of capital markets.