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 email@example.com.
*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 ...
Alpha and Gender Diversity Update
Did you know that college graduation rates for women have been steadily rising, with 57.1% of college graduates in 2015 being women? Yet in the Finance major that figure is only 29.3%. Did you realize that only 2.5% of nearly 6,000 mutual funds are run by women only? Or how about that team-managed funds with cognitive diversity outperform single-person managed funds by 25-58 bps annually, with 3 person teams having the greatest outperformance? Or finally, that only 9% of all VC / start-up funding goes to women-founded ventures?
These statistics and their changes over time were all presented and discussed at the 3rd Annual CFA Institute Alpha and Gender Diversity Conference held in Toronto earlier this month. CFA Society Los Angeles sponsored this important event and sent three delegates to participate at the conference.
Knowing the facts is a start, but understanding the underlying causes is necessary to advance the dialog and improve outcomes. So here’s a quiz: What is the underlying cause of the under-representation of women in finance?
A. Girls and young women are lacking appropriate role models.
B. Women are lacking necessary mentors and sponsors once in the field.
C. An inaccurate gender stereotype persists that women are not strong in math.
D. Women are less attracted to competitive environments.
E. Significant gender bias is built into hiring practices.
F. 45% of investors believe gender diversity does not affect investment performance
G. ALL OF THE ABOVE (and more)
Ding, Ding Ding — you’re a winner if you picked G, All of the Above. So what do we do? The conference offered several ideas, some new and some incremental to efforts already in place:
- Women must step up in a bigger way to act as mentors. This includes parents, sisters, professors and business colleagues. Evidence shows that all mentors are good, but female role models and mentors were even more valuable.
- To make exponential improvements, the solutions have to shift from individual actions to institutional behavioral changes and for this we need to start gathering firm-wide data.
- Quotas: There were mixed opinions at the conference but a greater percentage of speakers suggested that quotas, carefully monitored and executed, can jump-start behavioral changes.
- Encouraging behavioral changes when possible, is preferred over forced activities. For example, encourage managers to learn more about gender biases rather than mandating attendance at a class.
- Put your money where your mouth is. Women were encouraged to invest both professionally and personally in ways which encourage women’s professional growth (for example, investing in women-run and gender-diverse start-ups).
- Capitalize on and combine efforts with those focused on successfully integrating millennials into the workplace as there are some common traits and issues between women and millennials.
The conference provided many interesting and provocative discussions and we hope to bring more of what we learned to our local chapter through upcoming events. We encourage you to reach out to the Women’s Community of Interest if you would like to participate in programing and to share ideas.
Member of the Women's Community of Interest Back To Top ^^
ONE PERSPECTIVE ON THE VALUE OF TRUST IN FINANCIAL SERVICES
In our advocacy/ethics committee, members are asked to submit an article annually for publication to CFA Society Los Angeles (CFALA) general membership. This October, it’s my turn. In order to vet my qualifications to tell a professional membership to consider information in this era of fake news and propaganda, I will tell you a bit about myself and qualifications. My goal is to persuade the reader that the development and maintenance of trust will be important in all relationships you wish to pursue, especially in your desire to maintain income.
First of all, I am a board certified psychiatrist and licensed physician in the State of California. I have been active in CFALA and its predecessor since about 1995. CFALA must have trusted me in awarding me Outstanding Society Member Award 2009, awarded periodically as merited by CFALA. I was also named the Outstanding Committee Member in 2004, for my activities in Applied Behavioral Finance.
There are similarities in trust development between a psychiatrist and financial services professional. When young and just starting out, others may ask “Why should I trust this young person? How can he possibly know what guidance and steps are needed to insure my financial well-being?”
I faced this thrice in my life: first, as a young physician, then as young psychiatrist and finally in middle age, as a purveyor of financial management services. Without the development of trust with clients, colleagues, employers and licensing governments, I could not have attained satisfactory financial and personal security in my senior years.
I encourage members to read the CFA Institute article cited below. It posits that to develop trust one has to be professionally knowledgeable, credible, and reliable. It may be an oversimplification, but if you make an appointment, keep it. If you change an opinion, tell your other party as early as possible why you changed your position. In the fast moving global financial world assertions change frequently and quickly.
You will be faced with conflicts when your employer requirements differ from your client’s, and you will have to find a way to reconcile these issues to all parties.
Finally, reputations can be tarnished by the occasional stories of fraud and cheating, naming people or organizations such as Madoff or Corzine. People at the top are frequently protected, but a journeyman analyst or financial manager working with clients or within a company may not be protected.
Also trust is not always black and white. Different situations may require a more nuanced approach to trust. Blind or total trust can be dangerous. Evaluate everything you do and hear. 100% trust could lead to situations where you cross the street, trusting that cars will stop for you. You must use your judgment in all situations. It will serve you well for many years.
From Trust to Loyalty: What Investors Want
Future State of the Investment Profession (See Page 7 of the Executive Summary or Page 54 from the Full Study)
Discovering Phi: Motivation as the Hidden Variable of Performance
Member of the Advocacy & Ethics Committee Back To Top ^^
Nobel Prize winner Richard Thaler may have added $29.6 billion to retirement accounts
In this MarketWatch article, personal finance reporter Alessandra Malito provides insights into how the implementation of Thaler's theories of auto-enrollment in and auto-escalation of workplace savings accounts have substantially helped retirement savers. Read more... And more... Back To Top ^^
Why our productivity destroyed the 15-hour working week
Who actually benefits from productivity? According to one study, productivity has increased to the point that a full workday in 1970 can now be completed in 1.5 hours; yet these productivity gains are not translating into fewer working hours or higher wages for the average worker. In this thought-provoking World Economic Forum piece, Doctoral Candidate in Law Joshua Crook examines the "missed opportunities of our productivity boom."
The Equifax Breach: What You Should Know
In this September blog post, author, former veteran Washington Post reporter, and self-taught computer security expert Brian Krebs tells us what we need to know about the unprecedented 143 million-record Equifax breach.
What You Should Know About the ‘KRACK’ WiFi Security Weakness
More recently, Krebs published a similarly informative article regarding the "KRACK" (Key Reinstallation AttaCK) vulnerability -- a newfound weakness in "the security standard that protects all modern Wi-Fi networks."
Swedroe: ‘Sure Things’ Check-In
In this ETF.com blog post, author and Buckingham Strategic Wealth Principal and Director of Research Larry Swedroe provides an assessment of how his 2017 list of financial market "sure things" has fared through the end of September. The list is an informal distillation of impressions that Swedroe has gathered from interactions with financial advisors and the financial media at the start of every year since 2010.