Industry research outlines the trends and disruptions, suggests roadmap needed

Sydney 9 April: The ‘Future State of the Investment Profession’ Study’ (Study) released by CFA Institute describes an industry at an existential crossroads and warns that investment industry leaders who fail to transform their business models may jeopardize the future of their firms.

The release of the Study coincides with the ‘Putting Investors First’ campaign, an annual CFA Institute initiative to focus the attention of the industry on the needs of investors around the world.

The Study provides a guide to investment industry leaders looking to adapt using a series of planning scenarios derived by combining megatrends impacting all industries with other forces specific to the investment industry. These can be used as tools for leaders in investment management to steer the future of their businesses and ultimately improve outcomes for end investors.
Mr Anthony Serhan, Mr Anthony Serhan, CFA, President CFA Society Sydney and Managing Director, Research Strategy, Asia-Pacific at Morningstar said the industry was at an inflection point, where success or failure hangs in the balance.
“Industry leaders will make decisions over the next five years that will have an impact not just on their firms, but also on the entire landscape of the investment profession as we know it,” he said.

Among the megatrends identified are technological advances, redefined client preferences, new macroeconomic conditions, different regulatory regimes reflecting geopolitical changes, and demographic shifts. The scenarios are not forecasts but include possibilities for the future state of the investment industry.

Leadership Skills Critical to Future Competitiveness

The Study analysed the most important skills needed for effective leadership in the future. While there are common global themes, certain regions differed in their assessment of the skills most important for leadership success. Respondents from North America (61 per cent) and Europe (46 per cent) noted that the most important skill of an asset manager CEO will be the ability to articulate a compelling vision for the institution. In Latin America and in the Middle East and Africa, relationship building skills (42 per cent and 40 per cent respectively) and crisis management (39 per cent and 37 per cent) will be the two most important skills for leadership success. Respondents based in Asia Pacific see ethical decision-making (38 per cent), and relationship building skills (40 per cent) as especially important.

“Whatever the future holds, leaders in the investment industry will need new skills, and they will need to recruit and develop employees along new dimensions,” said Mr Roger Urwin, co-author of the Study and Chair of the Future of Finance Advisory Council at CFA Institute. “Soft skills such as creativity, empathy, and negotiating complex situations will become increasingly important.”

Roadmap for Success

To help leaders navigate through these changes successfully while building trust and increasing the benefits to society, CFA Institute urges asset owners, asset managers and investment intermediaries to focus on these areas for the future:

  • Professional transformation - Develop the mindset and practices by which the investment industry evolves into a professional status akin to law or even medicine.
  • Fiduciary implementation - Master the meaning of fiduciary in a way that can be effectively implemented even with inherent trade-offs and conflicts.
  • New skills for new circumstances - Develop new-era leadership. The industry’s biggest challenge is finding leadership who can articulate a compelling vision and instill an ethical culture. Improving diversity is linked to better performance and culture.
  • Stronger standards to restore industry trust - Specify and influence culture and practice with regard to values and costs. Create a culture and business model which align credibility and professionalism across a spectrum of critical attributes. Use the CFA Institute TRUST checklist: Transparency, Realistic measures, United values, Sustainable and fair rewards, and Time-tested relationships.

“This study clearly shows a critical need for investment firms to adapt more quickly to new conditions. In many cases, organizations need to adopt transformational change as we enter a new global investment era,” noted Mr Serhan.

“As the drivers of this transformation, industry leaders hold our profession’s future in their hands. They must demonstrate their purpose and passion to serve others, show investors the value of what the industry does and elevate the trust that end investors feel in investment organizations.”

Key Survey Findings

The views of more than 1,000 investment management professionals, including CFA charterholders indicate that significant change on all fronts lies ahead over the next 5-10 years:

Changing Investment Trends:

  • 73 per cent expect environmental, social, and governance factors will become more influential
  • 70 per cent expect financial centres in the Asia Pacific region will become more influential


Business Models Facing Pressure:

  • 84 per cent expect industry consolidation
  • 70 per cent expect to see more assets going into passive investment vehicles
  • 63 per cent expect profit margins at asset management firms to remain flat or to contract
  • 57 per cent expect institutional investors will look to reduce costs by in-sourcing more investment management activities

Opportunities on the Horizon:

  • 55 per cent expect globalization will offer new opportunities for the investment professionals, while 18 per cent perceive globalization as a threat
  • 49 per cent expect technologies will present new opportunities for investment professionals, while 23 per cent see new technologies as a threat

To learn more, read the ‘Future State of the Investment Profession’ Study at:

www.cfainstitute.org/FutureState