The new chief executive and president of the CFA Institute, Marg Franklin, completed her first 100 days in the job last week and already she’s made an impact. Amanda White spoke to her about the organisation’s influence in the decade ahead.
The challenges created by market disruption, a low return environment and a clearer focus on the purpose of capitalism are front and centre for the CFA Institute’s new CEO as she plans the strategy and assembles the team for the next decade.
Since taking on the role 105 days ago, Canadian Marg Franklin, has hired Allison Holmes as chief financial officer and Martin Colburn as chief information officer, cementing a team that will take the organisation into the turn of the decade.
“I’m thrilled so far, it’s been a very interesting 100 days for sure,” she says. “The world is changing, and there is lots going on and lots going on in our business. We have a great team and there are some very interesting opportunities for us.”
The CFA Institute, she adds, thinks deeply about the structural and cyclical challenges to the industry and has done an admirable job of providing thought leadership.
“Making sure the voice of integrity and trust is heard over a long period of time has been the raison d’etre for the CFA institute. Now there’s a lot of disruption that creates an interesting context for members and investors and the market at large.”
When looking to the challenges ahead, Franklin points out that the lower for longer interest rate environment is “not a trivial matter”.
“At the core, the context of what we can deliver to investors will be different than the past 30 years. on average ( delete?) We can see the real implications of that are starting to play out – pension plans are stretched by lower interest rates which increases liabilities and delivers low returns. What does that mean for their beneficiaries? Linking that in the ESG world, part of the “S” in ESG is to deliver financial security. We don’t have a playbook to address those structural and behavioural issues.”
The CFA will continue to deliver thought leadership and shape the elements of the market that are important to those structural and cyclical issues. In fact, Franklin believes the organisation is uniquely positioned to have a significant role because of its neutrality and lack of commercial interest in any particular outcome. In addition, it has a multi-constituent stakeholder group which allows it to see the market from multiple viewpoints.
Certification
The education standard is the cornerstone of the CFA Institute and how it serves its members is at the heart of organisation’s strategy.
“The thing about the charter program is that it is entirely democratic,” Franklin adds. “It doesn’t matter who you know or what experience you’ve had, if you have the discipline, knowledge, and ability to achieve that charter then you can get in. In that way it’s democratic and quite inclusive.” Her own experience was sitting the exams when she had a young baby and didn’t have the money to spend on an MBA program.
“The CFA was entrée to my success, and I could demonstrate commitment to ethics, integrity and the professional excellence standard,” she says.
On the other hand, it’s also exclusive because not everyone passes the exams, in fact only one in five candidates complete the charter.
There is an interesting conversation to be had about how the CFA certification evolves and whether that matches with the changing nature of the investment process, and the move from star individual portfolio managers to star teams.
“We can imagine a wold where understanding investments might be very important, but you may not require the charter. In the world I came from – the high net worth world –a tax adviser, an attorney and a financial adviser all worked together with clients, and each person was also able to converse in all the different areas. I can imagine a world where we expand out the CFA professional learning to be more applicable for those types of people,” she says.
Similarly, she says in a world of technology where AI and coders now play a meaningful role in the investment ecosystem, this group might want to have some level of understanding of investment principles.
“Where we have these types of situations – with subject matter experts that require some lateral skills- T shape skills – I think in that framework there could be more we could offer them.”
The CFA Institute has already begun to use computer based testing of the exams and has developed a staged process over the next three to four years to migrate to computer based testing across the different levels of the course.
Franklin believes “not doing it creates more risks than doing it” and it will increase accessibility and improve risk management.
“It’s not foreign for us to use technology and we have used computer technology and “AI” to make the exam more robust, for example to identify cheating. We have a staged process for the computer testing which will be across each year level, but start out in a phased process with level 1.”
Also within the last 100 days, the CFA Institute released the the AI Pioneers In Investment Management paper which outlines some case studies on the use of AI and big data technologies in investments.
“If you look at the headline around technology and the impact on our business, it comes off as a negative story, and that certain classes of jobs will be disrupted. Our view, which is demonstrated in these case studies, is that drilling down using big data and technology allows you to use a wider set of inputs and that can improve the decision making process, and ultimately create better decisions,” she says. “I think it is quite exciting. We have an obligation to do our very best for clients and while technology is causing disruption, forward-looking people could say this could be really neat and improve outcomes.”
Diversity
Franklin has had a long association with the CFA Institute including acting as the chair of the Board of Governors in 2011. She is a past recipient of the CFA’s Alfred C. Morley Distinguished Service Award in 2014, a member of its Future of Finance Content Council and has been a board member of the CFA Society Toronto.
She is also a founding member of the CFA Institute Women in Investment Initiative and a passionate advocate for diversity.
“Diversity is a core tenet of our business – in portfolio diversification – it’s a real thing, it’s just never made it to team construction in our business,” she says. “We are very interested in the trajectory of change in five years since we started the Women in Investment initiative. There is now a level of intensity and intentionality about the strategies for diversity that are working. Our view is if we can crack the code for women then we could make the changes to attract a more diverse set of people, particularly millennials, to this industry and create a value proposition that is more holistic.”
CFA has released a guide, Driving Change: Diversity and Inclusion in Investment Management, which included 20 action plans for investors to use in a bid to increase diversity and inclusion. As part of that the CFA Institute will work with 30 asset owners and managers as “experimental partners”, implementing diversity and inclusion action plans in their businesses.
Over a two-year period, the partners will liaise with the CFA Institute in implementing diversity and inclusion action plans, with the aim of the process to be a guiding light for other investment firms to follow.
“We’re looking at the ideas, data, actions, and shared experiences to advance this. It’s not perfect but a pretty good system of addressing some of the major issues,” she says.
Trust
The issues around trust and integrity will always exist in the industry, Franklin says, and meeting those challenges will continue to be core for the CFA Institute.
“We are steadfast to meet those challenges.”
Franklin says it is clear that consolidation and compression is coming and the industry will become a barbell of very large asset managers and niche players. This, combined with a honed focus on the purpose of capitalism and investments in finance, will change who is attracted to the industry.
“This will help create a more solid industry where we attract the right players to our business,” she says. “We want more educated people who are paying a lot of attention to integrity and ethics. There is lots we can do throughout the eco system around that and we are making sure those affiliated with us are on top of their game.”
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