The CFA Institute’s Changes May Please Employers — But They Don’t Serve the Client
William Kelly, CEO of CAIA Association — which offers an alternatives investments credential — writes that better and more transparent client outcomes will remain his association’s north star.
A recent CFA Institute member letter was forwarded to me two weeks ago from several global precincts highlighting today’s announcement on forthcoming changes to the CFA Program. Among other things, CFA Institute will now offer two new paths to become a charterholder, private markets and private wealth.
I found the letter, which is over 600 words long, to be disappointing. For one, it barely mentions the client or the duties of trust, transparency, and priority that is owed to her. Instead, this communique is focused on the employer, and what is in the best interest of the aspiring entrant relative to the “needs of (said) employers.” Even candidates who complete only part of the program will obtain a ‘market-signaling’ edge to hiring managers. This comes on top of the ability — at least in India — to put your candidate fees on a costly, interest bearing lay-away plan, which seems unlikely to end well for anyone other than those designing such an initiative.
Call me a cynic, but actions like these would appear to be more of a commercialized land grab by CFA Institute for candidates and profits. Instead of further fragmenting industry learning paths and duplicating efforts, CFA Institute, CFP Board, and CAIA Association, which already offers a credential for alternative investments professionals, should be collaborating on our shared mission. Higher standards of practice are more important than ever given that retirement risks and outcomes now rest with the individual, and alternative investments managers are increasingly offering products to individuals under the banner of democratization. Clients deserve more — and better — from all of us, individually and collectively.
We are 220 years removed from the Buttonwood Agreement, when 24 Buttonwood brokers arguably colluded to form the first stock exchange, and a century from the launch of the first U.S. mutual fund at MFS in 1924. Still, we have a long way to go in protecting clients.
The asset management industry didn’t have anything resembling a professional credential or creed until well into the second half of the twentieth century. It is instructive to contrast this with the formation of the modern accounting profession late in the nineteenth century. Imperfect as it was, the U.K. founders of accounting insisted that professional standards mattered and codified the measures from the very beginning. Contrast the accountants’ focus on the end stakeholder with the 24 brokers behind the Buttonwood Agreement, who primarily focused on themselves.
As great as our industry can and should be, it is not a profession. That should never mean that professionalism matters less than it does to the user of a financial statement or even the patient under the care of a medical professional. We should cede no ground to anyone who will not put the interests of the client ahead of their own. But let us never forget the enormous challenge before us. We are retroactively trying to professionalize an exceedingly large, complex, and global industry, which is subject to vastly different local practices and regulations. This is exacerbated by the fact that there is no common definition of what it means to be a fiduciary. The only real competition is opacity and ignorance, and the less we do as professional bodies, the stronger this two-headed hydra gets. Solving for this takes a village, and there is no single professional body, or credential, in our industry that can claim to be that one source of salvation — for the client.
As this announcement has increasingly become public, many constituents have reached out to me asking ‘what is CAIA’s reaction?’
As for my answer, CAIA wakes up today the same way it went to bed last night — thinking about the client. Our credential, or any credential for that matter, should never be monetized for an industry organization in the short term. Rather, we all should recognize the importance of professionalism within the mosaic of what it truly means, particularly in an industry that failed to embrace this concept as a founding tenet. This is what distinguishes us from trade groups and an identity we should never “evolve” from. That will always be our north-star leading to the only “pathway” that truly matters: better and more transparent outcomes for the client, to whom we have the duty and honor to serve well.
William Kelly is CEO of CAIA Association