Philipp Kristian Diekhöner - The Impact of Foreign Currency on a Managed Fund

Philipp Kristian Diekhöner is a keynote TEDx speaker, global innovation strategist and author of The Trust Economy, published in English (2017), German (2018) and Simplified Chinese (2019).  Philipp has spoken at eminent global organizations such as Facebook, P&G, Microsoft, Turner, Munich Re, Zillow, Globe Telecom, CPA Australia, Germany’s Federal Ministry for Economics and Energy, the Economist Intelligence Unit and many others. He’s written for Forbes, Esquire, e27, Marketing Mag and InVision blog plus several industry publications and featured across Springer Professional, Men’s Folio, Money FM 89.3 and Your Story. Philipp is also a founding partner of DDX, the award-winning German innovation foundry that helps companies innovate the most trusted products and services. In his free time, he’s an avid sailor and yogi.  

  

Trust is key to change and is highly relevant to investing 

After spending almost a decade working around the world in the sphere of innovation in numerous disciplines, Philipp makes two important observations: (1) that effecting change is particularly difficult, and that (2) trust is essential whenever we are trying to do something interesting or new. In fact, the world changes when trust patterns shift. This is, he says, why when old technology lingers, it is because it has managed to remain trusted. He added that by the same token, new tech that is actually not very good can still succeed also because we have somehow given it our trust. This change, whether good or bad, is very relevant to investing. 

 

“When it comes to financial markets, our trust in the way the world works determines which things change and which things stay the same.” 

– Philipp Kristian Diekhöner 

 

Summary: Technology influence the way we trust businesses  

This episode dives deep into a story about the placing (and misplacing) of trust in today’s technology. Our guest Philipp looks back at his investment in a robo-advisor fintech start-up in Singapore. He was attracted to its sophisticated digital interface and trusted them to actively manage his portfolio. At closer inspection, he discovered by himself his investment took a big hit due to a currency correction of which he had not been informed.  

 

Phillip commands a unique perspective on trust, but was led astray based on misplaced trust in the gadgetry and slick delivery of the robo-advisor and its promoters. Despite this disappointment, he nevertheless learned a profound lesson that has paved the way to his development of new methods of research. He warns investors to beware of putting money into a company that provides no absolute “proof points” or evidence to back up their claims. And ultimately, do their own homework on what they place their trust in, an essential point to remember when assessing risk. 

 

“With investments, there is always a difference between trustworthy players and trusted players. Some people just choose to be only trusted but not trustworthy. And at the end of the day, from losing a couple of grand worth of money, I actually realized that I gained a lot of insight  
into my topic.” 

– Philipp Kristian Diekhöner 

  

Early win with a ‘trustworthy’ robo-advisor lifts that tech’s appeal  

Philipp had worked a number of start-ups also in the Singapore fintech space and one was the robo-advisor, smartly. He knew the people well as he had helped them launch in the city state as a pioneer of some of the definitely more interesting fintech products. He also invested with them and earned some rewarding returns, all the while feeling that it was all more hip, modern, and relevant to him than investing in a bank or in the markets: “Because we all know that banks’ incentives are not aligned to yours”. Add to that his inside knowledge of working in finance for years, meaning he knew also what ordinary finance was like behind the scenes.  

Flush from modest wins and impressed by the tech, Philipp looked at a new robo-advisor company in Singapore with a sleek interface. He had written a lot about digital interfaces and appreciated that people were increasingly putting a lot of trust in these. As did he, injecting a sizeable chunk of money into it thinking that the robo-advisors presented well and that it appeared they would do a good job, as smartly had done.  

 

Undisclosed currency change exposure stabs in the back  

Part of the outfit’s pitch was that the size of clients’ fees is because they were a “full-service” enterprise and would actively manage his portfolio. But when Philipp actually started looking into its investment framework, it turned out to be mostly a work of fiction. While digging even deeper, there was a major currency correction, which of course can have major implications on anyone’s investment. In his case, that meant a loss of around US$7,000), which definitely hurt.  

 

Not-so-active management fails to include vital communication  

While the robo-advisor was selling itself as an “actively managed product