BUILDING THE INVESTMENT PROFESSION

Paul Smith, CFAPresident and CEO

@paulsmithcfa

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Growing, but facing disruption

STATE OF THE INDUSTRY

2015220082

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Middle class to grow 180% by 2040

Global investable assets to increase

to more than $100 trillion by 2020

Source: PwC Asset Management 2020: A Brave New World

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ASSET MANAGERS, 2004-2014 (REBASED TO 100 IN 2014)

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Source: New Financial

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GLOBAL AUM EXPECTED TO RISE

Source: PwC – in USD Trillion

Global AUM 37.3 63.9 101.7

2004 2012 2020 (est.)

In Mutual Funds 16.1 27.0 41.2ActiveInvestments 15.1 23.6 30.8PassiveInvestments 1.0 3.4 10.5

In Mandates 18.7 30.4 47.5ActiveInvestments 17.6 26.6 35.3PassiveInvestments 1.2 3.9 12.2

In Alternatives 2.5 6.4 13.0

INSTITUTIONAL OWNERSHIP CONCENTRATION

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Source: The 2010 Institutional Investment Report, The Conference Board

1-50

51-100

100-250

251-500

501-750

751-1000

1990 2000 2009

50.1% 54.2% 63.7%

59.2%

54.7%

51.1%

47.5%

44.6%

61.6%

64.7%

64.2%

62.8%

56.9%

70.3%

70.9%

76.3%

76.2%

70.2%

TOP 1,000 U.S. CORPORATIONSBy company size bracket

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WHERE ARE THE HIGH-NET-WORTH INDIVIDUALS?NEARLY A THIRD IN ASIA PACIFIC

Source: 2014 World Wealth Report

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THE RISE OF PASSIVE INVESTING

Source: 2014 Investment Company Fact Book

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GROWTH OF LOW-COST INVESTMENTADVICE STARTUPS

Wealthfront (US)

Betterment (US)

FutureAdvisor (US)

Nutmeg (UK)

Quirion (Germany)

Source: Grant Easterbook/Corporate Insight 2014 USD in billions

ROBO ADVISING IS GROWING!

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REGULATORY SCRUTINY

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2011 2012 2013 20140%

5%

10%

15%

20%

25%

30%

35%

40%

25% 25%26% 26%

33% 33%35%

36%

26% 26% 26%27%

28%29%

30%31%

Americas Asia Pacific EMEA Global

WOMEN AS PERCENT OF CFA PROGRAM CANDIDATES

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WOMEN AS PERCENT OF CFA INSTITUTE MEMBERS

2011 2012 2013 20140%

5%

10%

15%

20%

25%

30%

18%17% 17% 17%

25% 25%24% 24%

17% 17% 17% 17%

19% 19%18% 18%

Americas Asia Pacific EMEA Grand Total

WHAT’S WRONG WITH THE INVESTMENT INDUSTRY?

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BadBehavior

Poor value

proposition

Unethicalpractices

Regulatoryintervention

DecliningIntermediation(self-medication)

- Fees- Q-on-Qperformance Non-fee

paying assets(cash and real estate)

Loss of Trust

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WHAT DOES CFA INSTITUTE DO?

Leads the investment profession globally by promoting the highest standards of ethics, education, and professional excellence for the ultimate benefit of society.

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GLOBAL MEMBERSHIP ANDCANDIDATE REGISTRATIONS

19.8%EUROPE, MIDDLE EAST, AFRICAMembers: 24,533CFA Program Registrations: 45,382Societies: 40

63.2%AMERICASMembers: 78,096CFA Program Registrations: 73,595Societies: 86

16.8%ASIA PACIFICMembers: 20,839CFA Program Registrations: 91,401Societies: 17 + CFA China

More than 128,000

members in 150

countries;145 member

societies

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18Courtesy of Rip Payne

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THREE STRATEGIC FUNCTIONS

CREDENTIALINGDeveloping Future Professionals

WHAT MAKES A PROFESSION

• A common body of knowledge that is widely accepted

• Certification that individuals possess such knowledge before practicing

• A code of ethics, with compliance monitoring and enforcement

• A commitment to use knowledge for the public good, not profit maximization

• Continuing professional development

• Seal of approval from society

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THREE STRATEGIC FUNCTIONS

CREDENTIALINGDeveloping Future Professionals

MEMBER VALUE

GLOBAL INFLUENCE145 SOCIETIES WORLDWIDE

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FY2016 PRIORITIES

• Increasing society funding by 50%

• Doubling the spending on brand

• Investing in technology improvements

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THREE STRATEGIC FUNCTIONS

CREDENTIALINGDeveloping Future Professionals

MEMBER VALUE

STANDARDS AND ADVOCACY

HOW MEMBER DUES AND REGISTRATION FEES ARE USED

86%

14%

Credentialing*

Member Dues

* Includes curriculum

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54%36%

10%

Credentialing*

Member Value

Standards & Advocacy

* Includes curriculum

FY2014 REVENUES BY STRATEGIC AREA

FY2014 OPERATING EXPENSES BY STRATEGIC AREA

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WHAT ARE EMPLOYERS LOOKING FOR?

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SKILLS AND ATTRIBUTES FUTURE PROFESSIONALS NEED TO HAVE

Source: Investment Management: A Science to Teach or an Art to LearnCFA Institute Research Foundation, 2014

• Analytical ability• Broad knowledge• Ability to communicate• Ability to reason• Out-of-the-box thinking• Humility

LET’S GROW OUR IMPACT WITH INDUSTRY EMPLOYERS

Investment firms worldwide want to adopt the highest standard of professionalism, competence, and client

service for their own success.

We are in a unique position to help them meet these standards and improve their performance.

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PROMOTE ETHICS, EDUCATION, AND PROFESSIONAL EXCELLENCE

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PROGRAMS:

• CFA® Program

• Claritas® Investment Certificate

• CIPM® Program

THOUGHT LEADERSHIP & STANDARDS:

• Code of Ethics and Standards of Practice

• Pension Trustee Code of Conduct

• Asset Manager Code of Professional Conduct (AMC)

• Capital Markets and Financial Reporting Policy

• Global investment Performance Standards (GIPS)

• Continuing professional education

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PROVING OUR VALUE TO SOCIETY

WHAT’S WRONG WITH THE INVESTMENT INDUSTRY?

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BadBehavior

Poor value

proposition

Unethicalpractices

Regulatoryintervention

DecliningIntermediation(self-medication)

- Fees- Q-on-Qperformance Non-fee

paying assets(cash and real estate)

Loss of Trust

WHAT CAN WE DO?

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Demand high entry

standards

Be best pros we can be

Engage with local society

Change business models

Ensure future of the

profession

Credentials for all in the chain

- CPE- Local community impact

Volunteer!

- Combat short termism- Investors first- Services, not products

- Prove value to society- Engage with employers & regulators

“We are in the twilight zone of a great transition.”

- Unni Krishnan, CEO, Long Brand

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