Welcome to the CFALA e-newsletter, a periodic publication with stories about noteworthy events and programs sponsored or hosted by the society, guest articles by members, book reviews, and other items of interest to CFALA members. Click on the headlines below to read the full stories. And if you’d like to contribute a story suggestion or, even better, write an article, we’d love to hear from you. Please email Executive Director Laura Carney at firstname.lastname@example.org.
*Please note that the content of this e-newsletter should not be construed as investment advice, nor do the opinions expressed necessarily reflect the views of CFA Society Los Angeles.
In this issue ...
Advocacy - What's At Stake?
When CFALA Governor and Advocacy Committee Chair Dan Pomerantz, CFA asked me to compose an article about the work of the Advocacy Committee and my current ideas, I decided to start by looking up the definition of advocacy. Definition of “Advocacy”: Public support for or recommendation of a particular cause or policy. Example: The advocacy of traditional family values.
The Advocacy Committee is trying to promote the value that financial professionals contribute to society. We are attempting to overcome the effects of negative headlines surrounding financial services firms and individuals. For years, more so since the crisis of 2007-8, the public has come to severely mistrust our industry. Many people who rely on us were financially harmed by the great recession. Since that time, previously trusted names such as Bernie Madoff and Jon Corzine appeared as criminal robbers of investors. Many companies were found to have violated government rules and regulations and were fined severely without admitting guilt. The public can never find out the facts of what was done to warrant these penalties, which sometimes were in the billions of dollars.
From another viewpoint, our culture has been changing. Misinformation, even lying, has become more tolerable with fewer consequences. The investing environment is so obtuse, confusing and globally influenced that few outside of the financial profession can understand it. Therefore, the general public will greatly benefit from professionals whose life work is analyzing and studying the markets. This advice could come from hiring advisors or from financial sources on the internet at no apparent cost to the individual. Advice will come with multi-page legalese disclaimers.
Advocacy in this financial climate is no easy task. It has been suggested that financial fraud comes more often and in larger units from New York City and Washington DC. But that distinction is of little help to us Southern California. Polls continue to indicate a lack of trust for our industry. Indeed, a government effort to protect investors via massive legislation such as Dodd-Frank, which is now 5 years old, is in question. How exactly has this legislation protected investors? What government legislation has protected the general public in recent years? We share information about public mistrust with our legislators in Washington DC, but the public trusts them less than they do the financial industry. Yet the same people continue to get re-elected. The lack of trust isn’t holding them back so it doesn’t seem like a pressing issue.
CFALA Past President Mark Harbour has taken the initiative to promote the importance of ethical behavior and integrity in offering services or opinions. It is a necessary ingredient for long term stable and fruitful relationships. For those of you that would like to get more informed on advocacy and ethics, please refer to the Advocacy Committee’s Reading Resource List.
It is my feeling that ethics is the most important area for those who intend on making a career in financial services. Job descriptions, technology and legislation all change. As culture and society change, so must those people who wish to keep up or stay ahead of their profession. If you want to survive professionally…stay tuned!
By Larry Brody, Ethics & Advocacy Committee
cfa institute announces additional funding for local societies
In an August 4, 2015 email, CFA Institute President Paul Smith thanked members for their feedback and suggestions during his first few months in his new role. The email detailed a few initiatives he hopes to implement in the near future. Smith highlighted a proposal to double the spending on the brand in an effort to increase the recognition and value of the CFA charter, and plans to invest in a core digital transformation project that will modernize CFA Institute’s technology capabilities. But the announcement that may be of most interest to CFA Los Angeles members is the plan to increase society funding by 50% starting September 1.
Smith noted that in fiscal year 2015, CFA societies arranged more than 9,000 activities worldwide focused on education, member outreach, community awareness, and extending the CFA Institute mission worldwide. Smith made a presentation to CFA Los Angeles earlier this year as he has been trying to visit as many member societies as possible. It is possible that by visiting so many local societies, Smith has come to realize that many members’ only contact with other members or peers is through their local society.
The current CFA Los Angeles annual budget is approximately $750,000, which services the 2140 members. General and Administrative expenses, along with event expenses, currently are the two highest uses of funds in the CFA Los Angeles budget.
Incoming CFA Los Angeles President Rama Malladi was asked how much additional funding CFA Los Angeles can expect as a result of Smith’s announcement, and how the society plans to use the money. “We expect an additional $30,000. We will likely use this additional money to enhance brand awareness, member education, and industry outreach. Our focus areas will be more aligned with the CFA Institute focus areas due to alignment of incentives stemming from candidate enrollment.”
Upon hearing of the new funding model, Executive Director, Laura Carney responded, “We are very happy that CFA Institute has recognized the work the local societies do, the relationship with our members and the knowledge we have of our particular markets. The additional funding will help us move our mission and strategic plan forward in the Los Angeles area”.
By Thomas Derse, CFA
DOL’s Fiduciary Duty Proposal: Practical Implications for Investors and the Asset Management Profession
In this recorded (7/17/2015) presentation, CFA Institute Director of Capital Markets Policy Linda Rittenhouse and Head of Capital Markets Policy—Americas Jim Allen, CFA, bring together a panel of experts to provide an outline of the Department of Labor's fiduciary duty proposal and discuss its implications. Credits = 1 CE (including 1 SER). Read more...
What You [Individual Investors] Need To Know About Roboadvisors
The do-it-yourself, low-cost individual investing community is also pondering the implications of roboadvisors' emergence within the financial landscape. In this blog post, The White Coat Investor's James Dahle, MD, FACEP provides his thoughts on the strengths and weaknesses of roboadvisors, as well as an overview of 14 roboadvisor firms. Read more...
Winning Affluent Millennials: How this New Power Persona is Reshaping the Finance Industry
In this SlideShare, LinkedIn and Ipsos present key findings about how affluent Millennials are reshaping the finance industry -- "they're thinking outside the finance box." We've also included a link to the underlying white paper that breaks down the data collected through the study. Read more... And more...
The Success Equation: Untangling Skill and Luck in Business, Sports, and Investing
Your Curation staff continues to work through Coursera/University of Michigan's Model Thinking online course. The course's section on randomness draws upon investment strategist Michael Mauboussin's thoughts on skill and luck in investing, which can be found in the first half of his presentation at CFA Institute's 2012 Equity Research and Valuation Conference. Read more... And more...
Governments Need to Nudge Citizens to Make Good Choices
Do choice architecture interventions undermine our ability to choose freely? Some say yes. But if nudges that are implemented with good intentions prove to guide us toward making better choices for ourselves and for society, should they still be labeled unethical? Columbia Business School researcher Jon Jachimowicz and writer Sam McNerney discuss these questions and more in this interesting Scientific American piece. Read more...
Coursera, Stanford University, and the University of British Columbia will be offering this nine-week online course, starting on September 11. Game theory "includes the modeling of conflict among nations, political campaigns, competition among firms, and trading behavior in markets such as the NYSE." The course will involve "lightweight probability theory" and "very lightweight calculus." Like many MOOCs, the course is non-credit; however, it can be taken at a nominal cost (usually $50) or even for free. Read more...