Som Seif, president and CEO of Claymore Investments Inc.Della Rollins for The Globe and Mail
Som Seif is the epitome of the new generation of Canadian executives. He tweets regularly, is comfortable in front of a microphone or television camera, and he's not afraid to criticize his more established peers.
He's also enjoyed tremendous success building Claymore Investments Inc. – Canada's second-largest provider of exchange-traded funds (ETFs) – into a company with $6.5-billion in assets under management, over a mere six-year period.
As an investor, do the economy and the markets scare you right now?
I think everyone who is in the market needs to be a little bit worried about what is going on. But the reality is that fear is one of the worst emotions that a long-term investor can have. Fear ultimately makes people act in emotional ways that are going to hurt them in meeting their long-term goals.
Investors need to [make sure]they are committed to the markets, are well diversified, focused on reducing costs, and are investing as well as they can [to meet]long-term objectives.
Should people use the current market gyrations as an opportunity to invest more?
Absolutely. If you have the liquidity or if you have cash, there is no question that these types of environments are good things. When you see valuations at deep, deep discounts, the likelihood is that in the next five to 10 years, the markets will actually provide you with good healthy returns. The markets are on sale. Take advantage of it.
What is your advice to young, first-time investors who are nervous about getting into the market?
To them I'd say the best thing you have is the luxury of time. As a young investor, you have the ability to make mistakes. Twenty-five-year olds, who have lived their entire lives in front of a computer doing Internet searching, should take it upon themselves to learn. Take some hours to understand what investing is about, and how to be a successful long-term investor.
I don't care if you are 25 or 35 or 55, if you haven't got comfortable [with investing] you need to. In the next 25 or 30 years, you are not going to be able to rely on anybody else to take care of your retirement. You are going to have to do it yourself.
Are people still paying fees that are too high?
Absolutely. [But]fees are now starting to come into question a lot more. That's why [there are]firms like ourselves, and other low cost providers, and not just in the ETF space. That trend is going to continue. The train has left the station.
[But]Canadians are complacent. We all know that. Right now, Canadians have still not got the fire under them to move aggressively, in hordes, away from high-cost products.
The ETF market seems to have exploded with more complex products. Is that damaging to an industry that has promoted its simplicity?
We've seen an amazing amount of innovation, in new products, new asset classes and new strategies. That is going to continue. There are still a lot of holes that the ETF industry has not covered. The bad part is when people try to structure the [products]too much. More often than not, the structure is there to try to give you a different outcome, or return, or a better way for the manager to get paid their fees.
One thing ETFs really do a good job at, is that they give you great transparency. If a product doesn't have great transparency, then put it aside, no matter what.
Are derivative-based ETFs a bad idea in general?
There are good products out there that have some derivative base. Derivatives can be good, just like they would be in a mutual fund, or anything. But some products have been structured too much. That scares me, because if something ever happens to those derivative products – for instance, if a counterparty goes bust – that will resonate because there are many people on Wall Street and Bay Street and elsewhere in the world who want ETFs to fail.
You have a pretty high profile in the business community and in the media. Is that the new paradigm for young executives?
When you are a young company, you have to have a voice and you have to have a face. This is about making sure that Claymore has somebody out there as its spokesman. I feel very comfortable talking about what we do, and about what people should be thinking [about investing] I love to do that.
I don't think that it is the model that works for everybody. There are great leaders who are introverts, or don't like to get out and do those things. I think it really comes down to the style, and the business itself.
How important is social media in communicating with clients?
Social media is something that we have just started to take on, and I am starting to get more comfortable with. We are going to be much more aggressive on it. People are going to have conversations about us, and around us, and we can either chose to be involved in those conversations or stay on the outside. Our [view]is that we need to be involved.
You are an engineer by training. How did you get into the investment business?
I wanted to be an architect. And then I realized quickly that I wasn't going to do a bunch of degrees, so I said, "Okay, I think my second love is business." I wanted to run something.
I ended up getting hired in investment banking at RBC. I had no clue what I was doing, or what I was getting myself into. But I learned really quickly and what engineering gave me was the skill set to know how to learn.
Investment banking at RBC was a great ride. But the bureaucracy and the politics killed me. I recognized that when I built my own company I didn't want to see any of that.
What kind of a manager are you?
I'm really not a good manager of people. I'm a motivated, energetic person, and a leader from that perspective. I have great energy to go out and build this business.
I also really believe in giving people opportunity. I want people who are truly self-starters, motivated, and want to be accountable and responsible, and who love the challenge. I'm never a micromanager.
You are a competitive water polo player. What does that do for you?
I started in high school. It has been a great experience in my life. I've been doing it for almost 20 years.
What it has given me is balance. I think that you need something as a release in life, and my release has always been water polo. If I go in the pool for two hours, that's two hours of not thinking about anything else. It also [provides]camaraderie and leadership skills, and I met my wife there – all good things.
Do there need to be changes in the regulatory environment to make it easier for ETFs to flourish?
The Canadian [financial]marketplace is still a closed oligopoly. The Canadian banks have been coddled by our regulators and by our government. [The events of ]2008 only pushed that even further. There is a perception, at the regulatory and the government levels, that our banks are perfect and do no harm.
The [fund]distribution business in Canada is still highly controlled by the banks. They are getting stronger in the asset management industry and the independents are getting weaker – [except for]ETF companies. In the United States, regulators said [to the banks] "We are not going to let you push products on people that you have control over on the wealth side."