Investment banking grows beyond numbers

Arthur Korsun, CFA, Director, Investment Management, Northwestern Mutual Bank

Arthur Korsun is an experienced leader with a proven track record of effectively managing investment equities, fixed income regulatory and financial contracts. His expertise extends to cultivating strong client relationships, including hedge funds and major organizational clients globally.

Korsun currently serves as Director of Investment Management at Northwestern Mutual, where his ability to translate complex financial concepts into clear explanations makes him an invaluable asset to the investment management community.

In an interview with CIOReview, Korsun shared his insights on the challenges and emerging trends facing the investment banking industry and modern approaches to adapt to the coming changes.

Can you elaborate on your key roles and responsibilities and how they impact the company’s day-to-day operations and long-term strategy?

In my current role, the core focus is on the management of client assets, where we apply our expertise and experience in risk management and diversification strategies. Our approach goes beyond asset management to include comprehensive financial planning, regular monitoring and necessary adjustments to client portfolios.

My team and I also emphasize the importance of behavioral discipline in investment decisions. By taking a holistic approach to our services, we deliver great value to professionally managed investment portfolios. This is in stark contrast to what is typically achieved by individuals independently managing investments.

Through this article, I really want to highlight the unique advantages of professional portfolio management over self-directed investing strategies.

Can you elaborate on the specific strategies that you believe are critical to your role as Director of Investment Management?

The collective expertise and experience of our team is the foundation of our approach. For example, I bring my Chartered Financial Analyst (CFA) credential, and we also have a Certified Financial Planner (CFP) who specializes in financial planning, life insurance, and overall coordination. This diverse expertise enables us to effectively solve complex client problems, particularly in areas such as retirement allocation optimization and risk management.

In risk management, a common problem we observe is individuals self-managing their portfolios and inadvertently taking on too much or too little risk. This misalignment can result in significant financial losses or missed opportunities for growth. Our role is to ensure that risk levels are appropriately tailored to each client’s risk tolerance.

Another key component of our strategy is comprehensive financial planning. While some people think they can manage their finances independently, in reality, few have the comprehensive expertise required. Our approach covers not only risk management and diversification strategies, but also exclusive investment opportunities not typically available to individual investors.

Separately Managed Accounts (SMA) are an equally unique offering, especially for larger accounts. SMA allows direct ownership of individual stocks, selected by skilled managers to align with the index’s risk parameters.This approach can generate additional returns while maintaining a similar risk profile

For example, we use tax-loss harvesting, which can significantly improve after-tax returns, perhaps increasing returns by 1% to 3%. We also offer opportunities in alternative investments such as private equity and private credit, which typically offer lower market volatility and higher returns than public markets. Strategic allocation to these private market investments can be very beneficial.

Separately Managed Accounts (SMA) are an equally unique offering, especially for larger accounts. SMA allows direct ownership of individual stocks, selected by skilled managers to align with the index’s risk parameters. This approach can generate additional returns while maintaining a similar risk profile.

Last but not least, I would say that continuous monitoring and adjustment of the portfolio is the cornerstone of our strategy. This involves rebalancing in response to market changes to optimize portfolio performance.

How do you predict the industry will develop over the next 18 to 24 months? Are there any specific challenges or advances (technical or otherwise) that you find particularly interesting or important?

One of the most important trends I anticipate in the financial advisory space is advisors’ increasing access to alternative investment products. This expansion is likely to continue as individual client portfolios increasingly incorporate a variety of alternative investments, both liquid and semi-liquid.

In terms of technological advancements, companies such as iCapital and CAIS have made significant strides. They have grown significantly in recent years, primarily by making alternative investment opportunities more accessible to advisors. These platforms have greatly simplified the previously cumbersome alternatives investing process, which involved extensive paperwork and manual tasks. This makes it more feasible for advisors to allocate client funds to such investments.

We have also noticed that fund products are shifting towards a wider range of clients. Some funds are now also available to individuals with lower certification levels, extending opportunities beyond the threshold of substantial personal wealth traditionally required. Additionally, these funds are introducing more flexible liquidity options with quarterly or annual withdrawals compared to the previous norm of 5 to 10 year lock-in periods.

I would say that the future landscape of financial advisory services is likely to be affected by these technological innovations and fund management strategies. This evolution will provide wider access to sophisticated investment opportunities to a wider range of clients, including those with less investment ability.

What advice would you give to your peers and aspiring professionals looking to succeed and grow in this industry?

For those who aspire to thrive in the world of asset management and asset allocation, the most important advice I can offer is the importance of process standardization. Developing a consistent approach across your entire portfolio management strategy is critical. Avoid relying on ad hoc models or making one-time decisions for individual customers. Instead, strive to closely align your strategy with the benchmarks against which your performance will be measured. When you need solutions tailored to specific clients, try to integrate those solutions into your overall framework. This ensures a more structured and coherent asset management strategy, which is critical to the long-term success of the sector.