04/25/17

Future State of Investment Profession

An excellent report from the CFA institute covering the current state of the investment industry and challenges posed by economics, demographics and adopting new technology including robe-advisors and blockchain technology.

https://www.cfainstitute.org/learning/future/Documents/investment_industry_ecosystem.pdf 

Key Takeaways

  • Looking at finance as an ecosystem reveals important interconnections and points of friction in how finance currently works.
  • Evenwhenforecastsaredirectionallycorrect
    in finance, they are usually specifically wrong. Consequently, we use scenario planning to reveal insights about the future state of the investment profession, regardless of what future unfolds.
  • Investmentmanagementfirmsandtheirprofessionals need to prepare for several inevitable megatrends, including shifting demographics, disruptive technolo- gies, economic imbalances, regulatory scrutiny, and natural resource constraints.
  • Opportunities exist for firms that are adaptive to changing circumstances and focus on their end clients by delivering on their fiduciary duty.

Too often the business side is put ahead of the client side, and finance then becomes an end in its own right rather than a facilitator of economic activity. Investors and those who make capital markets work need to reconnect their work with the larger purpose of using capital to be supportive of societal wealth and well-being.

We see this disconnect in the industry’s obvious preoccupation with trading claims to wealth, with a lesser focus on actually creating wealth. Although this might be valuable in providing savers with appropriate assets, and plays a role in efficient price discovery, these benefits do not appear to be commensurate with the revenue earned by the industry or its size in the context of the overall economy.