Here are the challenges DWS’ new CEO will face amid greenwashing allegations
Stefan Hoops, who will become the new CEO of DWS, has a lot of work ahead of him to stabilize Deutsche Bank‘s asset management division and reassure customers after allegations of greenwashing by US and German regulators and authorities. Hoops, most recently head of corporate banking at Deutsche Bank, succeeds Asoka Woehrmann, who DWS announced on June 1 would step down.
Hoops’ rise to CEO follows high-profile raids on the offices of Deutsche Bank and DWS by German authorities seeking to leak information about funds that claim to use environmental, social and governance factors. in their investment process. The raids follow investigations of DWS by the Securities and Exchange Commission and the United States Department of Justice into allegations of greenwashing – overstating its sustainable investing efforts.
DWS should focus on clients first, said Jonathan Doolan, managing partner at asset management consultancy Indefi. The first thing any new leader in this position should do is go on a listening tour, talk to consultants and clients, and give them confidence in the direction of the business. The impulse, Doolan noted, is often to only focus internally after an event like this. But coming out with a narrative that the wallets work as they should satisfies customers – which means they’ll stay with the company.
The current market environment will make this more difficult.
“It’s not been an easy year for a CEO,” Doolan said. “Virtually every asset class you operate in is down. This is a particularly stimulating opportunity to know your positioning and stand out from the market.
Hoops will also face the challenge of coming from a different company. Taking on a leadership role in asset management after spending years in corporate banking will force Hoops to change its thinking, industry experts said. Institutional investor. This is even more true following allegations of wrongdoing within the company. Business banking can be more transactional, while success in asset management and investing takes place over many years, at least in best-case scenarios.
“One of the pitfalls is that there is impatience,” added Doolan. “If you think about asset management, almost all active management is expected to outperform over a full market cycle. To be able to manage these businesses, you have to have a much longer-term vision.
Hoops has years of experience at Deutsche Bank, starting in fixed income sales in 2003. He left in 2006 for a fixed income role at Lehman Brothers before returning to Deutsche Bank a year later. Since then, he has held several positions, most recently as head of corporate banking for three years.
“Business banking is all he’s been thinking about for a few years,” recruiter Charles Skorina said. “All of a sudden, he’s going to change gears. I think it was a timely promotion.
Described as tough and decisive, Hoops wrote in a LinkedIn post that he is taking on his new role with “the requisite humility”. He added: “At the same time, I also approach it with confidence. We have a great brand, the right business model and an exceptionally strong team in place. »
Moving a corporate banker to an asset management role is not an uncommon move in Europe, according to Doolan. “When you look at many European companies outside of the UK, the top three or four asset managers in each country are either bank or insurer owned,” Doolan said. “There’s a history of banks and insurers putting people in leadership positions, thinking people can fix things and change things.”
But that doesn’t mean the movement has always been effective. Asset management and corporate or investment banking are inherently different businesses, and without recognizing it, a new leader might struggle at first, Doolan said.
On the one hand, the risk profile is different. In the wake of the global financial crisis, corporate banks began to reduce risk, changing their business focus as regulators prevented or made it more difficult for them to engage in many activities, including lending. at risk. But asset managers are paid to analyze and then take on certain risks.
Asset management is also a people-oriented business that relies on relationship management skills.
“Another pitfall is that there is a perspective that if asset management has long been an art, it might be more of a science, so why aren’t we using technology to replace people,” added Doolan, noting that’s the opposite of what a company should focus on. Instead, he should try to keep his best employees.
Skorina pointed to the steady stream of departures at Deutsche Bank over the past few years. “They have constant turnover,” he said.
Hoops’ new role is likely to focus on growth through acquisitions, particularly in the Asia-Pacific region. “The bank made some interesting and strategic investments in China, which were growing,” a source close to the company said. “In Latin America, the bank has an excellent reputation.”
During DWS’s earnings call in late April, Woehrmann told analysts that the Asia-Pacific region was specifically targeted for mergers and acquisitions. “It is important to expand your distribution platforms. This is also what we are looking for in Asia, and these are the two main priorities,” he said.
“I’m surprised they haven’t sold off some of the US businesses to focus more on Europe and emerging markets,” the source added. “It was always something they wanted to do.”
Although DWS did not respond to IIWoehrmann said in a statement after the Frankfurt raids, “…the allegations leveled against DWS and myself over the past few months have become a burden on the company, as well as on my family and me. In order to protect the institution and my loved ones, I want to pave the way for a new beginning.