An interview with Paul Smith, Adviser at CFA Institute: 'Need more charterholders in Pakistan'

Paul Smith currently holds the position of Advisor at CFA Institute. He previously served as the President and CEO of the same. CFA Institute is present worldwide with eight offices, and 157 local member societies that cater to the 165,000 charter holders all over the globe. He joined the organization in 2012 as the Managing Director for Asia Pacific looking after the expansion in China and India.

His career spans over three decades, commencing with the role of asset management at Ermitage International, for which he later served as the CEO. He moved to Asia in 1996 joining Bank of Bermuda in Hong Kong as Asia head, eventually assuming the role of global head of funds services there.

Since then he has been active among the investment community of the region. In addition, he has also proved his mettle as an entrepreneur by initiating a hedge fund investment management firm, Asia Alternative Asset Partners. He holds a master's degree in history from Oxford University in addition to being a CFA charter holder and a fellow of Institute of Chartered Accountants of England and Wales.

Following are the edited excerpts of the conversation with BR Research during his visit to Pakistan:

BR Research: What does CFA Institute's broader mandate revolve around?

Paul Smith: CFA Institute is a membership professional body. Once you're in the profession, we work on continuing your education. The qualification is just a point in time; it is how you keep yourself fresh and knowledgeable and on top of your profession for the rest of your career that really distinguishes you as a professional. That is the core of what we do.

We also work on what we call advocacy, which is working with regulators, and opinion formers, around thought leadership. We are not an industry-lobbying body; we are an individual membership, aimed at ensuring that capital markets work for everybody, not just the professionals but for the end user as well.

BRR: We see a lot more CFA®️ Charterholders today than ever before. What in your view is the potential of Asian economies to be able to absorb all the upcoming professionals?

PS: There is potential. You can get into a position where you have produced too many charterholders for that particular phase of a country's growth. But do we need more charterholders here in Pakistan? Yes. We have 66,000 charter holders in the US. The US population is 320 million.

Pakistan has a population of 200 million people with around 400 charterholders. By that ratio, there should be 30,000-40,000 charterholders in Pakistan. But the current development of the capital markets in Pakistan and the wealth of the country wouldn't support that.

I don't have a formula for what is the right number for Pakistan but one way to look at this is to ask if there are any unemployed charterholders in Pakistan, and the answer is no. Does a charterholder get paid more than someone who is not a charterholder, for the same job? Typically, the answer is yes.

BRR: Do all CFA®️ Charterholders in Pakistan believe their job is appropriate for the qualification they have?

PS: No, and the same is the case in India. A lot of charterholders in Pakistan would consider their jobs are not appropriate for the qualification.

BRR: How does the CFA Institute intend to fix it?

PS: The way to deal with it is advocacy, which helps build stronger and bigger capital markets. In case of Pakistan, financial literacy is also a huge challenge that the government must tackle.

The challenge also lies in changing the perception of what CFA Institute is offering. If we just focus on trying to show the value we can bring to Pakistan, maybe we would get more support. This may result in better polices, better jobs, deeper and bigger capital markets. It would make the young Pakistanis getting through this qualification more content at the end of it.

Today, the smart young Pakistani charterholders go to Gulf or Canada, causing a brain drain. That's always something I feel guilty about; because it doesn't help the economy, rather burdens it. This is also why we aim to increase our advocacy efforts.

BRR: In today's fast-paced world, and changing business models, is the CFA qualification also evolving? You talked about how the technical aspect of the qualification is reducing with greater emphasis on soft skills. Could you also elaborate on the T-shaped skills?

PS: Yes, the curriculum is fast changing, much quicker than 4 or 5 years ago. Fixed income side has changed dramatically; behavioural finance, finance technology, artificial intelligence have come in. A lot of these concepts are relatively new and being squeezed into the curriculum. You are not rewriting the whole thing every year, you are adding value.

Our focus has not been within the curriculum; it has been the post curriculum experiences. One of the most popular things we have done recently is that we are working with an English drama school called RADA, which is our most famous academy of dramatic arts. We work with them and they come out and teach people, typically young women on how to present themselves, how to be self-confident, how to give a public speech, etc. So there is an aspect of professional development along with technical education. It is not just about what you know; it is also about how you put it over.

BRR: How big a part of your curriculum or post curriculum is the ethics education?

PS: Here in Pakistan, the things that we are working on are governance, ESG, and ethics. We spend a large part talking to the community about ethics education in Pakistan. We have trained 11 charter holders to give ethics teaching. So they are going to go out into the business community and elsewhere to try and teach business ethics.

BRR: How do you see the Fintech evolution, and how does it affect the way you conduct your programs?

PS: Fintech helps you to be scalable; it helps you to be tailored towards your clients and be transparent with them. It also helps you to be timely. Financial technology helps you design clever products, explain them better to your clients, deliver them in a more timely fashion, and make them cheaper.

Financial technology is part of what is collapsing our businesses' margin at the moment. We are going from a high-value added, low volume business to a high-volume, low-value added business. So that's the transformation the industry is going through and a lot of people are struggling with that.

I think there are a lot of businesses out in the world today like financial businesses and asset management companies that are effectively dead men walking. They don't know it yet because assets don't disappear overnight. You can be dying for a long period of time but what you should do is sell it at the start of the process rather than at the end when the value has dissipated. Most businesses hang on far too long; a lot of businesses out there today will be gone in 10 years.

BRR: Can you shed some light on the MiFID 2 regulation?

PS: MiFID 2 is an attempt by the European government, to bring transparency to different areas, particularly to stock market research. Most research is bundled up into price of the security that you buy or sell; it covers a whole range of things. What MiFID 2 was designed to do in this aspect was, it said you can't bundle it together - you have to price that research product separately.

This meant that the number of players who are doing stock market research shrunk; coverage has also shrunk. Financial services people are upset with that. Britain is coming out of the EU; this was always considered to be as the British initiative. There was already talk in the EU that EU will unwind some of these unpopular aspects of MiFID 2, so this maybe one of them.

BRR: We have seen several financial crises happening in the history, so can CFA®️ Charterholders in any way provide cushion against those?

PS: I hope so. The more ethically trained professionals know what they are doing, the less financial crises there'd be. But it is naive to assume crises will never happen because financial crises are simply over exuberance on human's part. Unfortunately, our natural tendency in life is to always assume that things go in straight line and so when stock market is up 500 points today, people will assume it is going to up tomorrow and day after. People think in straight lines all the time.

Crises are really built from the fact that very few people are prepared to be contrary and that's just a human problem. We like to hang together; we don't like to stand out in the crowd, that's the problem with financial crises.

BRR: What is your message for CFA®️ Charterholders and those pursuing?

PS: People, who are charter holders, remember that it is the start of the journey and not the end. It is what you do with your qualification that counts, not getting the qualification. So how do you keep yourself current for the next 30 years? That's your commitment, and how do you preserve your value? The ways you preserve your value is by joining CFA Society Pakistan and try to build a financial services community in Pakistan that has purpose and point because that's how you can sustain your career.

To those pursuing, I would say you're joining the most wonderful profession that we value, that we really intend to make Pakistan a better place and the qualification will help you do that and it will also help you connect to this wonderful global body that will help you if you want to move abroad, hopefully only temporarily. I know most of the market here is domestically focused but it won't be forever. If you want to manage money globally, this is a wonderful community to be a part of.