It is not our intention to cause offence or stir up controversy that might turn people against us, but one thing all the authors of this blog are clear about is that there is no point in writing articles politically correct, which do little or nothing to help readers find insights that go beyond the sterile and/or the run-of-the-mill. The truth is that we care little about the repercussions, whether in the form of rude anonymous letters or a persecution complex on the part of pseudo-professionals in management or consultancy. Some of whom, paradoxically, melt away like ice cubes in the desert as soon as, by a twist of fate, their professional paths cross with ours and they are required to follow the guidelines set by a Family Office. Indeed, in some cases where the relationship, through time and effort, enables these professionals to grasp the essence of our work, we often see a a flicker of healthy and honest envy in the sparkle in their eyes and in their confessions off the record, and that speaks volumes in its favour. So let’s get down to business, confident that we’re going to open many people’s eyes, and in the hope that only those who really deserve it—and the less honest among us—will take offence.
If we set aside risk profiles, MiFID and portfolio management, and focus on the management of SICAVs, the picture changes. But it's getting worse. When a private client (or their advisers) is not considered suitable and adequately prepared to manage oneself de facto Given that it is the Bank’s own SICAV, the pressure exerted by the Bank’s management is even further removed from reality. Under the pretext of the reputational risk the institution faces if the SICAV does not achieve results in line with the management company’s average, management criteria are being imposed that are absurd, to say the least.
That’s right, and in many cases the managers of these open-ended investment companies operate on the basis of just three guidelines: Return target, acceptable losses, proportion of equity and fixed-income assets in the portfolio, and very, very little else (I refuse to believe that the operating account for the bank and/or the management company could be the fourth guideline they work by). Moreover, this third proportion is usually a variable that depends on the first two constants. It saddens us to see that these management firms are far more concerned that the number of temporary breaches (of the regulations and limitations of these investment companies) incurred by the management company’s SICAVs is moderate, that they do not run into problems with the CNMV, or that the valuation criteria (which are becoming increasingly rigorous, A.D.G.) do not undermine their return figures relative to the benchmarks (sotacaballoyrey) of asset management firms at other banks.
For these managers, there is no connection whatsoever between returns (whether positive or negative), valuation criteria, temporary defaults, etc., and the growth of the client’s and their family’s wealth. Vital concepts that should form the very essence of investment and management strategy design are completely overlooked. What is more, these management firms are not even aware that such concepts exist, despite claiming to understand the client and their circumstances in order to tailor their management approach to their needs. And indeed, that is what they claim to do. Pathetic.
The annual divestment requirements to cover the GIA (expenditure, investment and savings) of the Family and its environment, the taxation of said GIA, the consequent application of such divested income to investment and savings outside the SICAV, the need to reinvest the FSC (safety and growth margin) in the same or other items within or outside the investment company, 
changes in projected rental requirements and divestments, as well as changes in acceptable risk levels based on the volume of FSC secured, and so on and so forth; these are some of the factors that The Unbearable Lightness of the Manager It's more than just Chinese; it's Swahili.
In fact, they cannot even grasp that there are concepts which should have some bearing on their work—such as estate planning, corporate and tax structures, business or property growth or decline, and divestment requirements—and apply them to GIA (expenditure, investment and savings), nor what on earth a safety and growth margin is for. Let alone even begin to grasp what a Vital Balance and its application in real life. Unfortunately, they often fail to realise that their assets are not limited to the money deposited with their bank. Nor do they appreciate that managing those assets cannot be approached in isolation from the rest, relying solely on the two constants and the variable mentioned above, with or without MiFID. Some, in a moment of clarity, reply: «No, of course not; I suppose he’ll have more money or another SICAV with a different institution.».
The concept of real estate or business assets (not to mention artistic or other types of assets) implies for these managers a trip into outer space, that is to say, something infinite and unknown that is beyond their comprehension, and which they do not even consider might or should interfere with their earthly work—work limited to the capital managed by their own organisation and to the repetition of the mantra: «»Return target, acceptable losses, proportion of fixed income and fixed income in the portfolio'. It’s a bit like explaining the Big Bang or a quasar to someone who believes the Earth is flat.
Even though some of those who take offence label us as arrogant know-it-alls, we wouldn’t want readers in general to get that impression. Nothing could be further from the truth, and those closest to us know this. We don’t have a monopoly on the truth and we make mistakes just like anyone else. Experience has taught us that humility is something that must never be lost, because it can often prove very, very costly. And we have never boasted of being able to predict the future or the markets, as others do when peddling their so-called predictive powers in one way or another. But it is true that, when it comes to the various problems that wealth often brings to its owners and to the proper management of assets, we know more than most. Our track record speaks for itself, and we have dedicated our professional lives (and even part of our personal lives) to this. In comprehensive wealth management, the financial aspect is just that: one piece of the jigsaw. But for managers, their area is everything, and they aim to «get to know their customers» through absurd questionnaires and the definition of a couple of numerical parameters. From that point on, your professional success (and financial reward) will depend on meeting or exceeding the benchmark applicable to the ghetto which is supposedly due to his client. That is all. Jeopardising the necessary progress and accepting the risks associated with their profile, whether these are manageable or prohibitive. Without caring, and without even beginning to understand that behind the money there is a family, certain objectives, circumstances, needs, a wide variety of desires, past, present and future investments, legacies, diverse and complex tax regimes, ownership and tenure of assets, capable or incapable heirs, family businesses or otherwise, present and future working capacities or incapacities, various health and risk coverages, investment affinities and capabilities, etc., etc., etc.
It is true that a financial manager’s remit is limited, and we cannot hold them responsible for being unaware of all the circumstances surrounding their clients. They aren’t paid for that (or are they?). But worst of all is that most of them are unaware of their own limitations. They are almost completely unaware of the world of wealth management beyond the limited financial remit, which is even restricted to the institution they work for. And the worst thing is not their lack of knowledge, but their contempt for the ignorance they carry and accumulate. Perhaps many of them were top of their class, and often that very lack of Humility They apply it in their work when dealing with the market. Age and experience certainly tame (and enrich) the wild beasts. But unfortunately, this realisation usually dawns on them when they are already far removed from the trading desks and screens – which is precisely when those wild beasts are at their most dangerous. I wonder why that is?
All in all, and with a few very honourable exceptions, The Unbearable Lightness of the Fund Manager, together with the investors’ own incompetence, are the main reasons why the vast majority of wealth is squandered and destroyed before the helpless eyes of those who helped to create it.
«I'm underwater and the beating of my heart creates ripples on the surface.»