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 ...
The Effect of Technology on Private Wealth ManagEment: CFA SOCIETY Los Angeles Hosts Forum
Technology affects every aspect of our lives in one way or another. From how we use transportation, to how we communicate, technology continues to evolve and there is little debate that many aspects of our lives have been changed. However, considerable discussion continues on whether technology is poised to completely upend the advisor-centric model in favor of more technology-mediated services. “Tech and Wealth Management: Transformative or Disruptive?” will be the topic of debate at the Beverly Wilshire Hotel on May 4th.
The forum is a CFA Society Los Angeles (CFALA) and CFA Institute Sponsored event. CFA Institute is sponsoring this event as part of its Private Wealth Management Forums, which are meant to stimulate discussion of the likely changes to the wealth management profession in the coming 5 years.
Tom Mahoney, CFA, co-chair of the CFALA Private Wealth Management Community of Interest, explains how the Private Wealth Management Forums got their start. “Bob Dannhauser of CFA Institute came up with the concept of the Forums. He, Mary Bobbitt, and I had breakfast in New York in November, where I filled them in on our local effort with the Wealth Management League. I'm told that our local success influenced Bob to decide to hold the first forum in Los Angeles.“
Co-Chair Yves-Marc Courtines, CFA added, “CFA Institute has high hopes for the Private Wealth Forums, and we at CFALA were fortunate to be selected as the inaugural location.”
The May event will focus on a critical development in wealth management: The rise of VC-funded robo-advisory software designed to disrupt and take business from traditional human financial advisors. Mahoney said, “The event will be a debate between one of the nation's top financial advisors, Steve Lockshin of AdvicePeriod, and one of the nation's top consultants, Seb Dovey of Scorpio Partnership. Attendees will vote electronically on the resolution both before and after the debate. We are trying to disrupt the usual format of panel/passive audience by incorporating debates and interactive roundtable discussions into our events.”
CFA Institute is taking a leadership role in helping to facilitate the future of wealth management. CFA Institute’s website says “No investment professional is in a better position to claim the higher ground than the CFA Charterholder.”
Mahoney added, “The wealth management industry has little in the way of required certification or knowledge. There is academic evidence that wealth managers as a group subtract value, and this has given rise to robo-advisory software to disintermediate the business.”
“However,” Mahoney noted, “there is a little-known sliver of the wealth management industry - roughly 2% - that has met the highest standard of knowledge and ethics: the advisor who is also a CFA charterholder.” The new initiative aims to highlight this overlooked sector of the business, and ultimately increase the attractiveness to the other 98% of advisors of attaining a body of knowledge by obtaining the CFA charter. Mahoney said, “The logic is that, by increasing investment flows to the 2% that have met the challenge, the interest in obtaining the CFA charter will increase, as well it should.”
Courtines said the forum will be open to the media, unlike many CFALA events. Consequently, CFA Institute and CFALA are hoping for more exposure through the media presence.
Any member who has Private Wealth clients or is interested in the topic of the changing Private Wealth landscape should seriously consider attending this exciting forum.
Click on this link to sign up for the May 4 event.
Click on this link to access the content for the Wealth Management Initiative that CFA Institute has launched.
Tom Derse, CFA Back To Top ^^
CFA Institute CEO PAUL Smith Provides Views on Advocacy and Membership
Paul Smith, CEO of CFA Institute was in Los Angeles recently to provide an update from CFA Institute’s perspective. While in Los Angeles, Smith provided comments to the CFA Society Los Angeles (CFALA) Strategic Advisory Council and also presented his observations at a member lunch meeting.
CFA Institute is beginning to review the characteristics of a potential 26 year-old charterholder and think about what education and training will be needed over the next 10 years. Some characteristics reflect demographic changes; rather than producing and holding content on the website, this young professional looks at social media as an engagement tool for building community. As a result, a mobile app will be available soon.
Smith noted 30% of the first-time candidates are 24 years old and younger. Many of these people do much of their reading on their phones and their attention span is lower than previous generations. Smith mentioned going to T. Rowe Price, whose investment professionals typically hold CFA charters, and being told by young professionals that a 9,000 page curriculum was too ominous and they would rather receive their information in bits and bytes, and did not see the need for a charter unless forced by their superiors.
Smith also talked about CFA Institute engaging in three areas: 1) Credentialing; 2) Member value, largely delivered by the local society; and 3) Advocacy. He spoke about efforts more focused on a “profession”, which invited and welcomed the participation of a large community of skilled investment professionals with education and opportunities for intellectual growth, rather than a “gentleman’s club,” which he used as an analogy to describe an elite group of select members with limited membership and a sense of exclusivity.
The membership is indeed broader and more diverse now, and growing, but Smith believes the core is, and should remain, the investment management profession, with exam curriculum emphasis. Forty percent of the U.S. members are now in private wealth management, and CFA Institute is spending $1 million in Los Angeles and two other cities on branding through various media channels.
A new CFA Institute Group was formed and had an inaugural meeting in February. The name of the group is the U.S. Standards and Advocacy Advisory Committee (USSAAC). CFALA has two members (Ken Yee and myself) who participated in this inaugural meeting The intent of this newly formed group (which was selected to be representative of members across all societies and various professional functional roles) is to review the priorities for advocacy issues in the US and help prioritize specific issues that the CFA Institute can incorporate into their future action plans. At the initial meeting, the group began with a review of the priorities and perspective from a survey of U.S. members, the U.S. Financial Services Committee and the Financial Choice Act, and the SEC Investor Advisory Committee.
For more details on the talking points from this meeting, you can access them at the following link.
Mark Harbour, CFA Back To Top ^^
Airline Overbooking Policy Well Known and So, Too, Should Be Its Creator
The vivid, viral, and alarming United Airlines passenger-dragging incident brought airlines' practice of overbooking into the national spotlight, despite the flight's being fully booked rather than overbooked. In this 2009 University of Illinois News Bureau article, Business and Law Editor Jan Dennis credits the late economist and professor Julian Simon for devising the practice of airline overbooking, and reminds us of some of the benefits that derive from using it properly. Read more... Back To Top ^^
Three Charts that Show Why Airlines Overbook Flights
Two days after the United incident, Bespoke Investment Group laid out in three charts the case for why flights have become crowded and even overbooked, and are likely to remain that way for the forseeable future. Access to Bespoke's daily post-market macro note, The Closer, requires registration, but the charts have been reproduced in articles by Business Insider and CNBC.
Political Biases Can Impact Your Investing
In this BAM Alliance piece, Director of Research Larry Swedroe cites investor confidence and election surveys supporting the notion that our investing decisions can be influenced by our political beliefs and biases.
MoAF Live Stream Event with Aswath Damodaran
Check out this Museum of American Finance live stream event with Aswath Damodaran, Professor of Finance at NYU’s Stern School of Business. In this talk, Damodaran underscores the importance of storytelling in valuation, arguing that valuation, no matter how intricate, is never just about the numbers. He defines someone who’s good at valuation as "a disciplined story teller or an imaginative number-cruncher."