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Paul Smith, CFA Institute

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Leaders must transform if investment industry is to thrive, says CFA Institute study

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The investment industry is at an “existential crossroads” and industry leaders who fail to transform their business models may jeopardise the future of their firms, according to a study by the CFA Institute.

The Future State of The Investment Profession report provides a guide to investment industry leaders looking to adapt, however, and it is timed to coincide with the Putting Investors First campaign, a recurring CFA Institute annual initiative to focus the attention of the industry on the needs of investors around the world.
 
The study provides 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.
 
“Our industry is at an inflection point, where success or failure hangs in the balance,” says Paul Smith (pictured), president and CEO of CFA Institute. “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.”
 
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. 
 
The study also 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 that are 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,” says Roger Urwin, a co-author of the report 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.”
 
“This study clearly shows a critical need for investment firms to adapt more quickly to new conditions. In many cases organisations need to adopt transformational change as we enter a new global investment era,” says Smith. “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 organisations.” 

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