Finance or farming? That was the wildly divergent career advice for students from three guest speakers at a forum on “The Future of Finance”, organised by the NUS MBA Finance Club.
Entitled “The Future of Finance,” the forum brought together the three speakers from banking, insurance and investing with very different ideas about the outlook for finance and the economy.
While finance is big business in Singapore, Jim Rogers, a well-known international investor and commentator pulled no punches in setting out his views on the topic.
In the current climate of crisis and scandal in the financial world, it is more important than ever that we hear a diversity of opinion, wisdom and experience. Only this way can we achieve a clarity of mind and a renewed sense of direction as we look to the future.
Finance plays an important and noble role in allocating resources effectively and promoting growth. It brings people with money and no ideas together with people with ideas and no money. But, as the current crisis shows, we also have an innate capability to mess things up.
So for today’s students – those who will be tomorrow’s leaders – we should listen to and learn from these diverse opinions. And as we look to the future we must combine this with a sense of care and responsibility. It was the lack of these that created the problems we face today.
“There is no future of finance,” he told students. “Finance is going down the tubes, all of you who are getting MBAs are making terrible mistakes and all of you who have gotten MBAs are making terrible mistakes.”
Things are bad in finance and the economy and the outlook is getting worse, Rogers said. To succeed, he told students, become a farmer.
“If you really want to become rich in the next couple of decades, you should become a farmer or a miner or maybe go into the oil business. That’s where the money is going to be.”
It may not be a popular opinion, but he admonished MBA students saying they were wasting their money on their degree. Rogers noted statistics showing that there were about 10,000 students graduating from universities with agriculture degrees in the US last year and more than 200,000 with MBAs.
“The real smart MBAs will learn about tractors,” he said.
The other two panelists disagreed. Ronald Ong is Managing Director, Chairman and Chief Executive Officer and Head of Morgan Stanley’s Singapore office with responsibility for its business in ASEAN. John Tan is Chief Executive of ACR Capital Holdings and Asia Capital Reinsurance Group and a Fellow of The Chartered Insurance Institute.
Both told the forum that banks and insurance companies will continue to play an important role in the economy with Asia continuing to outpace the performance of the US and Europe. Each made their case that the finance industry remains strong.
Ong said Asia remained a region of high-growth in the financial sector even though some banks had cut unprofitable lines of business and that the industry had trimmed about 10 per cent of its global workforce.
“As global banks continue to rationalise their business, I think a lot more resources will be dedicated to Asia, because Asia’s growth is expected to be higher,” he said.
He admitted that bankers had just weathered a tough couple of years that had brought about “a period of soul searching” in the industry.
But he added: “The positive thing about what’s happened is that it has made banks a lot more focused on the business that they want to do and should do and where they really truly have value add.”
Ong recommended that graduating MBAs now should look at commercial banking and not investment banking. “The traditional banking business – commercial banking, lending, trade finance, payments cash management foreign exchange – they’re as vibrant and as stable as we’ve ever seen. Why? Because life has to go on.”
For his part insurance executive John Tan argued that tighter regulations in Asia have kept institutions, especially insurance companies, out of much of the trouble that ensnared Western giants like AIG in the past decade.
“Asia is doing all right,” he said, adding that the insurance industry in particular is stable and that even in a slow economy people need to insure their businesses and their goods.
Insurance companies in the US and Europe got into trouble because they took too much risk. “Insurance companies should not be looking for high returns,” Tan said. “We provide security.”
Tan admitted that insurance would never be “as glamorous as banking” but that as a career it offered a lot of opportunity.
Still, Rogers was adamant that finance as an industry followed great ups and downs and currently there were just too many people in finance. When he started his career, he said, no one wanted to go into finance.
The answer to current problems was not more regulation, Rogers said. “The industries in America that got into the serious trouble in the past five years were the industries that were most regulated: insurance, banking, mortgages. It’s not that we don’t have regulations, we have plenty of regulations, but we have incompetent regulators who knew what was going on.”
Turning to the tractors again, Rogers said the challenge ahead was that seven billion people in the world would need food and that was the opportunity for this generation.
Morgan Stanley’s Ronald Ong said farming was not a career option for four million Singaporeans, and in a final argument for the future of finance he told the story of a local food stall owner.
Beginning in 1999 with small investments of his stall’s profits in one company’s stock he said the man has grown his portfolio to almost $9 million today.
“So there’s hope for finance after all,” Ong said.