4.
Professionalism increasingly recognized
Professionalism draws on competencies and values while embedding ethics and purpose. These attributes are not always easy to judge or manage. The issue is how to do so in a new technological and socially connected environment to produce benefits for the industry, investors, and society.
KEY POINTS
- The extent to which professionalism confers an explicit edge varies by industry segment and geography. In the Purposeful Capitalism scenario, there is the possibility that professionalism becomes increasingly emphasized by firms and recognized by clients, especially by the growing client segments of millennials and women. In this narrative, the industry adopts an enlightened self-interest mantra—recognizing that putting clients first is good for business and good for society.
- Professionalism is closely related to client alignment, as well as competencies and ethics. As the asset management industry evolves along more complex and transparent lines, a rise in sophistication and, by extension, in professionalism will likely occur in both the business-to-business (B2B) and business-to-consumer (B2C) marketplaces. In this narrative, professionalism’s link to value becomes strongly accepted. This dynamic reflects the development of better assessments of culture as measurement methodologies evolve in an era of big data.
- Professionalism is associated with increases in trust. And because trust incentivizes long-term saving and investing, it produces greater value for investors (see The Next Generation of Trust, CFA Institute 2018). The stronger the professionalism in markets that are early in their development cycle, particularly Asia, the greater the discretionary flows to these markets.
- Being professional and developing trust require a business model and a strategy that are in sync. First, professionalism is more likely if the organization has relatively few conflicts of interest and manages any conflicts well. Second, profit motivations need to be balanced with the purpose-driven motivation to meet client expectations. Third, time horizons of investment managers and clients need to be aligned and appropriately long term. These alignments are consistent with taking fiduciary responsibility.
- The degree of subjectivity in defining professionalism makes it difficult to integrate into regulation as presently configured. Regulators do see culture as connected to professionalism and critical to outcomes, however, as evidenced by their increased focus on culture.