The CFA Institute has released a research paper – Future State of the Investment Industry – which identifies four key narratives including sustainability that will shape the investment industry over the next five to ten years.
The paper draws on survey responses from 3,000 investment professionals globally to offer a macro perspective of the megatrends and scenarios shaping the future of the industry over the next 5–10 years.
It provides a road map for investment professionals to navigate the changes and improve client outcomes.
The report also covers how current and aspiring investment professionals can best prepare for what is to come.
The first narrative is ‘Diverging Worlds’, referring to the differing challenges emerging and developed economies face.
Deglobalisation, geopolitical conflict, demographics and technological innovation are the key areas where the CFA Institute sees this divergence taking place.
The second is’ Sustainable Finance.” According to the institute members, investors will continue to increasingly take environmental, social, and governance (ESG) considerations into account in their decisions, particularly as they pertain to externalities.
Possible outcomes of an increase in focus on sustainable finance are projected to include greater consistency in alignment between investing techniques and the Paris Agreement as the investment industry prioritizes net-zero pathways through new metrics, business models and investment models.
Additionally, the investment industry is set to integrate sustainability in climate change mitigation and standard setting into its regulatory focus, and investment strategies are expected to increase their emphasis on social factors more broadly, including labor rights, supply chain oversight, DEI practices and social equality.
Digital Transformation is the third theme and unsurprisingly focuses on the hot topic of the day – artificial intelleigence.
The report noted that AI is already reshaping the investment sector, ‘often for the better.’ It said 91% of members whose firms have implemented AI and big data into their core business operations believe it has helped.
Digital assets and tokenisation – also known as crypto or blockchain technology – are expected to grow ‘more ubiquitous’, and help persuade new individuals to become investors.
Last but not least is ‘The End of Cheap Money’. The CFA Institute noted that central banks have abandoned zero interest rate policies, at least for the time being, but high inflation and sluggish economic growth mean new investment strategies and products to satisfy clients are needed.
Overall, the report said that much of the business sector and investment industry is likely to embrace a multi-stakeholder focus with an emphasis on long-term sustainable practices and climate change mitigation.
“The Future State of the Investment Industry survey findings also show an investment industry at an inflexion point. Forces that have defined the sector for years, if not for the past five decades, have begun to shift or even reverse, with economies under strain as we enter a new, uncertain and transformational era,” said Rhodri Preece, CFA and senior head of research at CFA Institute.
He added, “Our analysis reveals several implications for firms, including opportunities for greater product personalisation, AI-driven productivity gains, and industry conditions that are more conducive for successful active managers to demonstrate their value.
The challenge to the industry and to investment professionals will be to adapt quickly and to create a better, more integrated, more sustainable, and more client-focused sector.”
Research centre,”
The announcement also coincides with the launch of CFA Institute’s new Research and Policy Center, designed to engage and convene thought leaders, policymakers, decision-makers and a community of subject-matter experts on the most impactful themes facing the investment industry.
“The marketplace of ideas is all too often characterized by research or policy positions without practical value or skewed by bias or partiality,” said said Paul Andrews, managing director for research, advocacy and standards at CFA Institute.
He added, “The CFA Institute Research and Policy Center offers a non-partisan forum for industry leaders, regulators and subject-matter experts to address unprecedented and often systemic challenges and opportunities that are facing the investment industry,”
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