11 Sep Finance Matters Interviews Daniel Godfrey from The People’s Trust
Daniel Godfrey has led both the IA and the AIC. He founded The Investor Forum, which to promote long-termism among asset managers, asset owners and companies. He is an NED of Moneybox, an app that enables people to round-up their digital spare change into an ISA and of Big Issue Invest Fund Management, the social impact investor. He is Founder of The People’s Trust, which crowdsourced its start-up costs from over 2,300 members of the public. It is due to launch in September 2017 as an independent investment trust with a long-term total return objective and a social impact component.
Base: London, UK
Position: Co-Founder, The People’s Trust
Daniel, can you tell us a bit about your background?
I started working in financial services when I left University and had a variety of selling and marketing and product development roles. The product development helped me think about how financial products could work best for customers. I started in the industry in 1982 and worked my way through pensions and insurance and open-ended mutual funds and then found myself working in listed investment companies (investment trusts) of which there about 400 in the UK. I was the marketing director for the biggest provider of investment trusts which was a UK Investment Bank called Flemings, which was later acquired by J.P. Morgan. I like to say I stayed one step ahead of success because by then I had become the Director General of the trade association for these investment companies, the AIC, and in that role I had to think about the industry from the outside and its long term future and its sustainability. The association was funded by shareholders and so we took a strong line that we existed to represent the interests of consumers. I did that for about 10 years. Then in 2015, I joined the Investment Association, which represents primarily all the asset managers in the UK so about £6 trillion in assets under management which is about a third of all the assets managed in Europe. Post financial crisis I was hired with a strategy and an agenda to work with the industry, see how we could improve what we did – both for the industry’s growth and sustainability but also to avoid negative regulatory consequences because it was clear that the spotlight would eventually move from banks to asset management. It became clear that there wasn’t sufficient consensus for some of the more difficult reforms to be successful in the ways that I hoped.
What were your thoughts about the next steps at that point?
I became increasingly convinced of the importance of investment management to have a positive influence on the economy and society and increasingly concerned that this potential is highly unfulfilled. We have had close to 10 years since the global financial crisis and a seeming economic recovery yet enough people are fed up. You can recognise that the economic growth is not being shared broadly throughout society such that even people with jobs feel less secure. These people wish for a change and it makes them vulnerable to populist messages. The true purpose of investment is to create sustainable wealth. If you can achieve that, then wealth creation creates jobs, creates GDP growth and tax revenues that can fund education, healthcare and welfare and infrastructure spending.
We will only get productivity growth through long term investment. But although the purpose of investment is long term sustainable wealth creation we have a capital markets structure and an investment management structure that doesn’t have that as its purpose. The measures of success in that marketplace are very short term and as a consequence, the investment management industry which has the power to control corporate behaviour through its votes is actually infecting the nonfinancial economy with a very short-term perspective. So here we are with trillions of pounds of investment that is being passed around from hand to hand within the financial markets, we have 4 trillion pounds in the UK sitting in deposit accounts not creating wealth and the money that is there is not really being deployed by corporate executives in ways that will create wealth over 10 years and 20 years because they are being managed by investors to deliver things in very short term horizons. I guess I would say that I left the investment association having failed to achieve my objectives but not having changed my mind on how important the mission was.
And these understandings led to setting up the People’s Trust?
I realised that I would need to try and set up something that addresses the problem from outside the system. The simplest way of doing that for me was to set up a mutually owned long term investment fund that was accessible to the mass market and that you could have a number of social impacts that could be very positive. We are excessively risk averse but also know we need to have money later in life so we want our money to be deployed to make a better world for our children and grandchildren. The idea was to create a social enterprise that would be mutually owned and so not trying to make a commercial profit for anyone other than its customers and that it would try and improve financial inclusion by being accessible to anyone who could save 10 pounds a week and upwards, giving them a zero-cost savings platform.
The aim was also that it would try to drive ‘long-termism’ by measuring its success over 7 years in total cumulative return and have a strategy of investment in companies that can create long-term wealth sustainably. It would also drive engagement with shareholders through social impact by allocating a small proportion of our funds to social impact enterprises. Finally it would bolster social enterprise credentials by putting caps on pay for people working in the business and not having performance based bonuses. The listed investment company status would show shareholders that they collectively owned it and, ultimately, controlled it. We would deploy the capital using professional investment managers in a way that’s looking only to invest in very high-conviction, long term, high-engagement basis. This means not necessarily only companies that are perfect today because I think that there is a great need for engaged shareholders. If that works, maybe we can demonstrate that you don’t have to sell people sugar, they might prefer chocolate to broccoli but they understand eating broccoli regularly is important. I think that if we can change people’s eating habits then we can persuade people to come on this journey because it’s aligned to their values and their non-financial objectives. I also think that they will get better results as well.
When we launch the People’s Trust, people will be able to buy shares in the People’s Trust, and that will give them a share in the underlying asset and a voice in how we are run. Eventually, we will have a platform that allows people to invest from as little as 10 pounds weekly. We will have a proper fund launch in September.
How much does the People’s Trust need in order to grow?
We would hope to grow through people’s regular savings and new people hearing about it and wanting to be a part of it. The ambition would be to become a multi-billion dollar pound fund within a few years and to have some real clout and voice in demonstrating that this model works.
We send regular updates to founders on our progress which contain explanation of our strategy and targets and our approach to stewardship. I am getting quite a lot of engagement coming back which is fantastic and quite a lot of offers of help with people with real expertise which would be a great help to us. We would like to provide a platform for shareholders to be engaged, to express their views to talk to other shareholders and know that their voice will be heard.
Any parting words of advice for others wanting to follow in your footsteps?
I’m not sure that my career path is necessarily one to emulate! But I’d say I’ve learned that if you try to do the best you can every day, the results will take care of themselves. And don’t constrain what you do out of fear of failure – just be sure that when you do fail, you fail in a forwards direction.
Disclaimer: This Interview is not intended as an offer or solicitation for the purchase of any investments in the People’s Trust.