Paul Smith, CFA: Looking Back and Looking Ahead

Speaking before you here today does represent something of a full circle for me as I attend my last annual conference as your president and CEO and have this final opportunity to speak before you.

The theme of our 72nd annual conference is disruption! We all need to be thinking ahead — very timely for me personally! I have no doubt that you will leave this conference better informed and better prepared for what lies ahead.

So, in thinking about this speech, I wanted to try to draw together some of the themes I have spoken to you about on previous occasions and to give you all a status report on where, I think, we stand today.

The more things change, the more they stay the same: professionalism, purpose, client service, ethics. These elements of our lives will never be disrupted — they are timeless.

In all the years of our history, these foundations have been our North Star. They were the themes our founding members espoused: the importance of professionalism, maintaining professionalism throughout your career, demonstrating professionalism to your clients. Themes that remain just as relevant today as they did back then.

Over the last five years, our member and candidate numbers have grown very quickly and, as a result, we have been able to carry our mission into all four corners of the globe.

But growth for its own sake is not the objective of a not-for-profit. Our growth serves our mission of raising professional standards throughout the world and is testament to the progress we have made towards that goal.

I personally find this global dimension very exciting and motivating. For me, some of my most enjoyable moments have been working in Africa, Latin America, Asia, emerging Europe, and the Middle East.

The energy in these markets smacks you right between the eyes. This is where the young and the eager are. They see finance as a force for good and essential for societal development — building strong and sustainable economies and supporting the general well-being of their populations. They live our mission every day of their professional lives.

In my travels, I have been constantly reminded that our program builds bridges — tangible ones for sure, but also intangible ones, helping to unite our world in a much, much deeper sense. We don’t care what gender you are; we don’t care what ethnicity you are or what your politics are. We stand for equal opportunity for all those who have the courage and ambition to join forces with us. We help create a globally connected, level playing field for our professional community.

In my inaugural message to you as your CEO, I called out our mission right at the outset of my speech: The title of that address was “Let’s Make the World a Better Place for Investors.” I said that we have to make change happen by advocating for policies that really benefit investors and society at large.

I asked the questions: How can finance solve the problems of tomorrow? How can we pilot a sure path in conditions of uncertainty?

As investment management professionals, we all rely on data. But that data is necessarily backward-looking and is of limited help in a turbulent, ever-changing world. We need to be brave and to actively seek out those areas where data is poor — and where the exercise of human judgment is key. We seem to have forgotten that this is the very objective of investment management.

And nowhere is this need for courage and judgment more evident than in the area of sustainability, where the lack of complete and consistent data has held many back from investment opportunities.

Yes, investing must produce returns. But investment must also flow to where capital is needed to solve the challenges that society faces.

For the past five years, we have tried to speak with a bolder voice to get this message across. While we cannot demand a seat at every table, we can earn one via thoughtful and persistent advocacy that puts investors’ interests first.

So I would like to see our membership, as individuals, be much more involved in policy advocacy. We have failed to properly leverage our huge army of 170,000-plus charterholders. Think of the impact we could make collectively!

I see advocacy, together with continuing professional development, as the twin pillars of any professional body. We need to advance on both fronts.

So I call on you all to help deliver policy advocacy in your community through the development of local advocacy plans and through engagement with local policymakers. Let your voice be heard!

In Philadelphia in 2017, I posed a very fundamental question: What is finance for?

What do we come into work every day to accomplish? And how much value do we truly add to the world in which we live?

I continue to believe that our role in society is misunderstood, that we have failed to establish the purpose of finance in the popular imagination. And I think this is largely our own fault. We are poor advocates of our purpose.

Our primary role is to advance the interests of our clients, the businesses they invest in, and the communities in which they live and work. There is real purpose and nobility in finance!

We need to be louder and prouder about our purpose. We need to stop talking to ourselves and reach out to the broader community. We need to show up in places where we aren’t expected and be passionate advocates for finance.

Last year in Hong Kong, I followed up on the theme of “what is finance for?” and spoke about purpose and professionalism as the building blocks of earning more trust.

I discussed the growing movement by leaders in our industry to discuss and debate the very purpose of finance. I noted that we have a higher purpose than simply striving to beat a benchmark index.

And this debate, delighted to say, has now moved beyond finance to include the role of corporations in society and the very nature of capitalism itself. I think this is a healthy discourse, and one that we need to be front and center in.

I believe that the successful conclusion of this debate, long after my tenure ends, will be a purpose-driven, client-connected, and highly valued profession by all parts of the society that we live in.

Which side of this debate are you and your firms on?

In that first speech in Frankfurt, I called on our membership to work in a more ethical and purposeful fashion in order to build our profession in a manner in which we can all be proud.

Colleagues, let’s be honest: This goal remains a work in progress, though I think we have made some.

The financial industry’s reputation post 2008 has recovered somewhat — mostly, perhaps admittedly, as a result of stronger markets. But we still have a long way to go if we are to fully restore our clients’ trust in us.

When I spoke to you back in 2015, I thought our industry was at a crossroads: under scrutiny, lacking a clear purpose, and being inundated by new regulations. I said we needed to reform ourselves. Have we?

Our industry still cannot seem to get out of its own way and to stay clear of trouble. And that should concern us all very deeply.

Those of you who have listened to me speak about this subject have perhaps heard this analogy: You would not want your doctor to stop learning when she became an MD. You would not want your accountant to stop scrutinizing the tax code once he became a CPA. And yet we, as a professional body, do not formally require continuing professional development for the ongoing maintenance of your charter.

I firmly believe that we must take this step to further our journey towards professionalism. We are working very hard to build out our educational offerings so that we can make a continuing educational requirement obligatory. The time frame is not yet certain, but I hope it will be within two years of today’s date, so let’s start the conversation now.

I promise you that this will not be a revenue generator for CFA Institute; nor will we force members to study CFA Institute materials only; nor will we prescribe what members need to study. Our contribution will be to provide you with learning materials that help you advance your career and to maintain your technical and ethical competence — all delivered to you in a mobile-friendly fashion.

This change will require your support, of course, in a member vote to change our bylaws. I will campaign for this initiative throughout the balance of my tenure, but the actual member vote will be on the to-do list of my successor and of the then-board. I implore you all not just to support this much-needed step when the time comes, but to be active advocates for it now. Please have the courage to stand up for what you know to be right!

I believe that should we fail to adopt mandatory CPD, then we will never fully achieve or deserve professional status and we will simply become a credential with a clubhouse attached.

I also noted in Frankfurt that the industry faces a diversity problem. I cannot say that I expected this fundamental issue to be solved in five years either. And a look at the genders of the most senior leaders in our industry shows that equality is still many years away.

However, within our own organization: yes, significant progress. Our board, after this year’s election, will be 50% female, exceeding our stated target of 30%. And you should all be very proud of that.

Yet in terms of female charterholders, we have not yet really moved the needle: Still only about 19% of charterholders globally are women. However, encouragingly, we are making progress at the candidate level. Our Level I candidate pool is now made up of 38% women globally. In 2015, that number was 32%. So some signs of a brighter future.

There is, of course, more to diversity than gender equality. As leaders in our industry, we must be champions of diversity and inclusion in all of its aspects. A more diverse and inclusive workforce generates better outcomes for all. Numerous studies have borne this out. Cognitive diversity is key to successful investment returns for clients. Let’s measure up in this regard too.

I said at the outset that the last five years have been marked by tremendous growth of our organization but also by the consistency of our mission and message.

So in closing, I ask you to please stay the course. We can face disruption without losing sight of the values we hold dear.

We must continue to develop ethical future professionals through our credentialing programs and uphold high standards of entry and professionalism.

We must strive to build market integrity and to grow our influence globally.

And we must never lose sight of our mission, to lead this profession forward for the ultimate benefit of society.

It has been my great good fortune to have met so many charterholders from so many countries over the years.

I truly believe that we have a wonderful and unique opportunity to establish ourselves at the head of a profession that society truly values. It will take continuing hard work, courage, and obstinate consistency of purpose — but we have those values in spades. We can do this — together.

My friends, thank you from the bottom of my heart for these last five years. Please connect over these next few days and say hello. It has truly been an honor to work with you.

The journey continues for all of us, and I am so glad to have accompanied you for part of it. I wish you all every success in your careers and in your lives.

Thank you, and have a truly wonderful conference!

This article originally appeared on the CFA Institute Annual Conference blog. Experience the conference online through Conference Live. 

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All posts are the opinion of the author. As such, they should not be construed as investment advice, nor do the opinions expressed necessarily reflect the views of CFA Institute or the author’s employer.

Image courtesy Harry Richards

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Paul Smith, CFA

Paul Smith, CFA, is president and CEO of CFA Institute. He has more than 25 years of relevant financial services leadership experience in many aspects of the investment management industry.