MIT 2017

Where future leaders will focus

Future leaders of the investment industry will have to embrace diversity, a panel at the Fiduciary Investors Symposium has said.

The panel, chaired by CFA Institute managing director, Americas, John Bowman, discussed the next five years in the investment industry, a conversation prompted by the CFA’s paper Future State of the Investment Profession.

“Leaders need to change for the future of the investment industry,” Bowman said. “Leadership is becoming more important to transform the industry.”

Roger Urwin, global head of investment content at Willis Towers Watson, who co-wrote the paper, said one of the motivations for the study was that too many people in the industry are specialists who don’t look at the entire ecosystem.

“Finance has to get out there more and think about the big picture, [about how] behaviours matter and about how it is doing something for society,” Urwin said. “The research confronted the industry and found the status quo is not an option. Leadership needs to change.”

The chief investment officer of the California State Teachers’ Retirement System (CalSTRS), Chris Ailman, said he was shocked by the CFA study’s finding that only 11 per cent of the 1100 investment professionals surveyed said the industry added considerable value to society.

“That ethical question will be huge in the next 10 years,” Ailman said. “I wish I could be optimistic. We need to really be thinking it through – what’s our value add to society? We have to prove we add value to society.”

He added that in the next five years, Baby Boomers will retire and Generation X and the Millennials, who care about environmental, social and governance issues will become the new industry leaders.

Skills for the future

Bowman said the skills and competencies needed in the industry will be fundamentally different in the future.

Lori Heinel, executive vice-president and deputy global CIO of State Street Global Advisors (SSgA), pointed out that investment leaders of the future will need to understand mathematics and data but also have the skills to communicate with many different stakeholders.

“I also think we need more vision, and these skills classically come from the liberal arts,” she said. “We see too few young people who really value that [ability] to synthesise information and create a vision.”

Another necessary quality will be diversity, Urwin said.

“It used to be more individualistic, but now so much more of our output is in team settings,” he explained. “Diversity comes up and bites you on that. How we achieve cognitive diversity is critical, and we have to face facts, the diversity in our industry is pretty poor.”

CalSTRS is one of the few organisations in the industry, on the sell side or buy side, that has implemented true diversity, and 50 per cent of Ailman’s team is women.

‘Diversity of thought’

“I’m biased, I think women make better investment officers than men do,” he said. “But it’s not politically correct to say the outcome would have been different if instead of Lehman Brothers it was Lehman Sisters or, even better, Lehman Family. Diversity of thought is essential.

“There is a narrow group thought that comes from the Ivy League and then goes to Wall Street. We are lucky on the West Coast. Gen X and other generations that look at the world and this industry differently will be our future leaders and we have to get them interested.”

Heinel, who was a spokesperson for SSgA’s Fearless Girl statue on Wall Street, said the organisation “cares deeply about diversity”. The firm runs all its advertised job descriptions through software to gender-neutralise them, and conducts job interviews based on competency not experience.

Inspired by CalSTRS, SSgA has also launched a Gender Diversity Index, which is made up of the listed US large-cap stocks with the highest levels in their sector of gender diversity on their boards and senior leadership. SSgA also has a Gender Diversity Index ETF, called SHE.

The panel also considered the lack of trust in the industry and the need for the industry as a whole, not just individual service providers, to be trustworthy.

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