In the past couple of years I’ve looked to wealth management practices as a model to be a more effective research manager. There are a couple of reasons for this. Research management is now a ‘trusted advisory’ service in universities. Professors are high net worth individuals. Behavioural economics has relevant insights that apply to both research and wealth management. In both cases the manager acts as a ‘choice architect’ to help create better outcomes for clients and researchers.
So it was sobering to read media coverage of Jacqueline McDowall’s testimony to the Financial Services Royal Commission:
In early 2015, Mrs McDowall and her husband went to Westpac for financial advice. The couple wanted to buy and live in a property that they could use as a bed-and-breakfast.
At the time they had combined superannuation of $200,000 in industry funds HESTA and CBUS, and a residential home worth about $485,000 but they also had a mortgage of $400,000 and other debts.
Mr Mahadevan told the couple they should put their super into a self-managed superannuation fund, sell their family home and then borrow money to buy a bed-and-breakfast.
I’m not a wealth management adviser but to me this is a ‘choice architect’ failure. Industry funds like HESTA and CBUS outperform retail superannuation funds. $200,000 is probably not enough for a Self Managed Super Fund once portfolio turnover, trade execution, and transaction costs are taken into account. The equity-to-debt ratio was high for their mortgage. Owning a bed-and-breakfast is a personal goal – and one that needs to be tested in terms of investment return versus risk. It’s not clear that any of this was done.
Increasingly, research management involves weighing up and making similar cost-benefit and risk-reward decisions about research programs. Research managers can also learn from areas like Client Psychology (Hoboken, NJ: John Wiley & Sons, 2018) in financial planning.