Paul Smith was installed as the president and CEO of the CFA Institute in January, having joined in 2012 to lead its growing Asia-Pacific business. He still runs his own hedge fund in Hong Kong, Asia Alternative Asset Partners, and has over 30 years’ experience in fund management – despite only completing the CFA exams himself 15 years ago. We asked him a few questions at the CFA conference in Frankfurt earlier this month.
"The CFA is increasingly a standard in the financial services industry, but doesn’t lead to a pay rise or promotion…"
Paul: "… is this the only reason why you get education?"
"But why should people undertake the CFA Program if it has hardly any impact on their career?"
Paul: "Well it does, but it is not necessarily only reason for doing it. The reason you do it is to be better in your job. By being better in your job, you hope that you will eventually get on better in your career and get paid more money. But you shouldn’t do the CFA Progam because you want to be paid more money. You should do the CFA Progam because you want to understand more about the world you are operating in. It is not that the education itself makes you a better fund manager than me, but it says everything about you as a person. It says that you are committed to your career, you value knowledge and expertise and you are prepared to spend your time acquiring it, that you are ethical and that you place your client interests above your own – that’s what a CFA says. It does not say: Because I am a charterholder I get a better job or get paid more money."
"A young professional has the choice doing a Masters in Finance, an MBA or the CFA Program. Why is the CFA Program better than an MBA?"
Paul: "It is not necessarily better. It depends on what you are interested in and where do you want to take your career. If you are interested in investment management then you should do the CFA. If you don’t know, maybe a MBA would be a better choice because it’s a broader exposure to the business community. The CFA Progam opens up the investment management world in more depth. So don’t do the CFA Program unless you are interested in investment management."
"But isn’t an MBA better if you want to make it into management?"
Paul: "We don’t teach business management skills. It depends on which stages of your career you do these things. An MBA is broad-based business training. I am a qualified accountant, which is for me a much better broad-based business training than an MBA, because an MBA is done in a classroom, accountancy is done on the shop floor. So I did accountancy first, then I had an enthusiasm for investment management, so I did the CFA second. How you add the basic business skill depends on how your career develops."
"Students can already start participating in the CFA program. Would you recommend people to start with as early as possible with the CFA?"
Paul: "Yes, definitely. If you as a student are interested in the investment world than the CFA is a good qualification to have.
As an undergraduate you are only allowed to take Level I, you can’t take Level II and III. Level I is sets a base for what you need to know at the beginning of your career as an investment professional. So you can acquire that while you are still at university but you then have to go out to get the relevant work experience and to pass the other two levels to become a Charterholder."
"… and when are you too old to do a CFA?"
Paul: "I was 40 when I did it."
"The UK plans a referendum to decide its future in the European Union. If they abandon the EU, what impact would that have on London and the continental financial centres like Frankfurt and Paris?"
Paul: "My sense is, when I am travelling through the continent, that Europeans are pretty fed up with the position Britain has taken over the last ten years. When I have asked charterholders in various countries in Europe I often got the response that we have to sort this out: either stay or leave and stop trying to hold both sides of the question. I believe that the referendum is a very positive step because it will answer the question one way or the other. If Britain leaves Europe then this will be obviously tremendously positive for Frankfurt because it is the obvious location for Europe to centralise around. This could be a much more coherent model in the way Europe looks at itself. However, I do not believe that the UK will vote to leave the EU."
"But what impact would it have on London? Many international banks using London as their hub for Europe. They announced cut down teams and jobs in London and move it to the Eurozone."
Paul: "London would become a two tier market. It would still have a place between Europe, North America and Asia. It would weaken London as obviously every financial institution in London is pro-Europe. Frankfurt and other European financial centres would benefit. In the same way as Switzerland has a future outside of the EU, London would have a future outside the EU, just not as bright a one."