The head of the CFA Institute says Asia has a serious shortage of wealth management talent. Firms - and graduates - must take a long view for sustainable business and rewarding careers, in his view.

It is an oft-repeated comment that there is a dearth of talent in Asia’s wealth management market when marked against the region’s rapid economic growth. And with that sort of pressure come demands for more education of bankers, advisors and investors.

With the talent management challenge being an acute one in the region, the CFA Institute, a global body promoting financial services training and development, sees particularly strong demand for its programmes. Only recently, this publication’s eye was caught by a report in late March of how Ateneo de Manila University of the Philippines had edged out 20 other student teams from 15 other countries across Asia-Pacific to win the ninth CFA Institute Research Challenge Asia-Pacific Regional, advancing to the global final that was held on 17 April in Georgia, US. A team of future investment management professionals from Canisius College (Buffalo, NY) was named the winner at the global final - drawing in a total of 4,000 students from 865 universities.

The institute is big: it has a total of 126,000 members worldwide; 60,000 of them are in the US and US CFA Institute members have a larger slice of wealth management members than in other countries – that may change in future.

This publication recently spoke to Paul Smith, president and chief executive of the CFA Institute, about how his organisation approaches wealth management and, in particular, the industry in the Asia-Pacific region. Smith has held his current role since January and joined the institute in 2012; he has a 30-plus-year history in the financial services business, working in alternative investments and with a period at HSBC. He joined the institute in 2012 as managing director for Asia-Pacific, overseeing its expansion into China and India. It is very clear that the region and its challenges are dear to Smith’s heart.

“The days of having a client RM who was a hail fellow well met is being phased out. Client relationship people have to have in-depth expertise and knowledge,” Smith said.

“We just don’t spend enough money on education because the industry doesn’t rank it highly enough. We will continue to find it hard to convince the public of the skills they should pay for,” he said.

The endless merry-go-round of hirings and departures at wealth management firms in Asia (a brief glance of these news pages bears this out) is not a sustainable long-term approach for an industry where clients value a more considered approach and professionals who take the long view of their careers, Smith said.

“At the moment, because the industry is young, job-hopping is our single biggest problem; people move for relatively small increments of cash and not necessarily for burnishing their CV. Remember that you are in your 20s with 40 years of work ahead of you. You have time...there is no need to think about constant changes,” he said.

A danger for the wealth and wider financial industry is that without sufficient investment in training to deliver expertise, people will struggle to see what the “added value” proposition of much wealth management actually is, he continued. “Hence the rise of passive investment products, robo-advisors and other avenues – and people will ask if the industry adds values to justify the fees they pay,” he said. “If we have a race to the bottom we will fail to build long-term, sustainable businesses."

In Asia, the problem of talent shortages is nothing new, and to some extent explains why firms are looking at digital channels and innovations as “force multipliers” for their RMs. Credit Suisse, for example, recently told this publication that there are an estimated 7 million millionaires in the Asia region. On the assumption that a banker can on average handle 35 clients, that would translate into a need to have 200,000 private bankers. But at the moment there are only around 10,000 such people.

Some banks, such as UBS, Credit Suisse and BNP Paribas, among others, have developed training programmes for wealth managers in Asia and there are, in places such as Singapore, programmes pitched at graduates and post-grads. This publication regularly tracks such schemes (to see an example, click here). As regulators around the world seek to tighten training standards for financial advisors, expect such activity to flourish.

Shortages
“In Asia, we are short of private wealth advisors,” Smith, with masterly understatement, continued. “We have more high net worth individuals being generated than the private banks can handle.”

Part of the problem is that banks, many of which are listed organisations where their shareholders are eager for results, haven’t been sufficiently willing to plough profits into training for the long term, Smith said. The pay-off from better training to banks and other institutions will be measured over periods of five to 10 years, not shorter, he said.

However, does Smith see more CFA-qualified members working in Asia’s wealth sector?

“This is a trend and it is developing in Asia and Europe. Wealth management professionals will look to the CFA as the qualification of choice,” he said. There are 25,000 CFA members in Asia; the four largest jurisdictions for Asia are Hong Kong, Singapore, India and mainland China. There are members in 16 Asian countries.

“The growth rate here [in Asia] is phenomenal…Of those doing exams, 45 per cent are from Asia. There are around 225,000 credits at any one time and 45 per cent of them are in Asia.”

To obtain the CFA charter requires three exams, with one exam per year, plus at least four years of experience in the industry. “You are a professional and experienced and qualified to manage people’s money,” Smith said.

Importantly, he said, around 15 per cent of the time in training is around ethical issues.

The CFA Institute also serves charter holders with ongoing professional education and learning; it also works with the industry and regulators. “We are a neutral body,” he said.

The Asia market is a long, long way off from being saturated with CFA charter holders. The Chinese population is more than three times that of the US, and yet the US overshadows China in terms of CFA charter holders – there are 60,000 of such people in the US, and only 3,500 in China, a massive disparity, Smith said.

One trend Smith remarked on is that there is a slight move away from the DIY model of wealth management in Asia and because this is changing – albeit slowly – this should drive CFA demand, he said.

Challenges?

“The biggest one [challenge] is educational standards in general. Regulators are doing different things and issuing licensing regimes and looking at the level of competence that is required; what is happening is that there is tension between the regulator and industry – which ends up with the bar being set low,” Smith said.

“The industry will see the exams as too hard; the regulators will see exams as too hard – but they are hard because this industry is hard and it is complicated,” he added.