Calling for an industry-wide transformation of business models, the CFA institute has released the results of a study titled The Future State of the Investment Profession
. Summarizing the views of more than 1,000 investment management professionals — including people with the CFA designation — the study indicates several significant trends that are expected to play out over the next five to ten years.
In terms of investment focus, 73% of the respondents said they expect an increasing influence of environmental, social, and governance (ESG) factors. Geographically, 70% of them expect that the influence of financial centres in the Asia-Pacific region will increase. The report also touched on several mega-trends that would affect the investment industry along with other fields; these included technological advancement, demographic shifts, new macroeconomic conditions, and changing regulatory regimes.
With the various cost pressures faced by financial firms, the respondents also gave different scenarios that they thought could occur or continue in upcoming years. Eighty-four per cent cited industry consolidation; 70% anticipated more inflows into passive investment vehicles; 63% expected profit margins to stay flat or narrow further; and 57% expect institutional investors to internalize more of their investment management activities.
The respondents were also asked to identify the skills they thought would be instrumental for an asset manager CEO to lead effectively in the future. The responses differed based on region, with those from North America (61%) and Europe (46%) prioritizing the ability to articulate a compelling vision for the firm. Relationship-building skills were most cited by Latin American (42%) and Middle Eastern (40%) respondents, followed by crisis management (39% and 37%, respectively). In the Asia-Pacific region, ethical decision-making (38%) and relationship-building (40%) were most significant.
“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 Roger Urwin, a co-author of the report and a chair of CFA Institute’s Future of Finance Advisory Council.
To help industry participants negotiate the changes ahead, the CFA Institute recommended several priority areas of focus. Among those were to shift to a more professional mindset; an increased emphasis on fiduciary duty; and influence culture toward greater credibility and professionalism following the institute’s TRUST checklist (transparency, realistic measures, united values, sustainable and fair rewards, and time-tested relationships).
Are you getting caught up in a ‘race to the bottom’ on costs?
Advisors urged to cut the sales pitch