Leadership Profiles - CFA Institute

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Robert Stammers (Bio)

Interview with:
Robert Stammers, CFA
Director, Investor Engagement, CFA Institute;
Chair, 2013 IFIE-IOSCO Global Investor Education Conference Programme Committee;
IFIE Advisory Board

1. Tell us about the work of CFA Institute?

    CFA Institute is a global, not‐for‐profit professional association of more than 116,000 investment analysts, portfolio managers, investment advisors, and other investment professionals, of whom 108,000 hold the Chartered Financial Analyst® (CFA®) designation. The CFA Institute membership also includes 138 member societies in 60 countries and territories. It represents the interests of investors and investment professionals to standard setters, regulatory authorities, and legislative bodies worldwide by leveraging the insights of its members, who are leaders in the investment profession. CFA Institute sees the promotion of fair, open, and transparent global capital markets and the protection of all investors as the strategic objective of its work.

    CFA Institute is best known for developing and administrating the Chartered Financial Analyst® curriculum and examinations, and issuing the CFA Charter. The idea for the CFA designation took shape with Benjamin Graham because he wanted to create a professional designation for security analysts similar to those witnessed in "fields of accounting, law, medicine and other professions". CFA Institute can trace its lineage back to the establishment of the Financial Analyst Federation (FAF) in 1947 and began administering the CFA credentialing program through the Institute of Chartered Financial Analysts (ICFA) in 1959. Later, the FAF and the ICFA merged to become the Association for Investment Management and Research (AIMR). In 2004, AIMR changed its name to CFA Institute.

    In addition to the CFA and CIPM programs, CFA Institute develops and maintains the highest ethical standards for the investment community, including the CFA Institute Code of Ethics and Standards of Professional Conduct, Global Investment Performance Standards (GIPS®), and the Asset Manager Code of Professional Conduct (AMC). (More information on CFA Institute, as well as the CFA and CIPM exam programs may be found at www.cfainstitute.org.)

2. What is your role at CFA Institute and how did you get involved with the organization?

    I received my CFA Charter and became a member of CFA Institute in September of 1997. During that time, I worked many years as a senior executive for several institutional real estate fund managers. As a portfolio manager, I ran several commingled funds, as well as a timber fund, and several pension fund separate accounts. Subsequently I started my own business consulting to corporate clients. As part of this endeavor, I created the curriculum and an equity valuation tool for two investment education companies. I have also written many research articles on finance over a hundred investment related articles for Investopedia, Forbes, Yahoo Finance, and several other financial periodicals. I have also created investor education materials and personal finance content for several corporate clients. My interest in helping investors gain the requisite information and tools to invest, eventually led me to my position at CFA Institute as director of Investor Education.

    The purpose of investor education (IE) at CFA Institute is to help individual investors make better investment decisions. To do this, we provide them with prerequisite content on investing and best practices for identifying, engaging, and evaluating investment advisers. Our aim is to provide this content through a variety of distribution channels, from contributions to our own website and other external publications, to providing educational seminars and other programs directly to investors through our global network of societies and through our investor education partners.

    Another aim is to use our significant global reach and relationships with leaders in the investment industry to help other like minded organizations promote transparent capital markets and enhance investor protection around the world. Our continued membership in IFIE is due to its accomplishments in investor education as well as its global presence. CFA Institute is focused on partnering with organizations like IFIE to help support organizational efforts to strengthen individual investors' capacity to manage their own finances.

3. CFA Institute focuses on equipping individuals with very high level toolkits to help organizations and individuals make better investment decisions. How do these individuals use the skills and certifications?

    The Chartered Financial Analyst (CFA) designation is a mark of distinction that is globally recognized by employers, investment professionals, and investors as the definitive standard by which to measure serious investment professionals. The CFA curriculum is firmly grounded in the knowledge and skills required every day in the investment profession and covers ethical and professional standards, securities analysis and valuation, international financial statement analysis, quantitative methods, economics, corporate finance, portfolio management, and performance measurement. Other reasons for the charter being held in such high regard is the rigor of the examinations and the commitment required to pass them. With the exception of level I, exams are given only once per year and candidates must pass all three levels to receive the designation. This means that most candidates must commit between 3-5 years of self study without any guarantee of passing. The average passing rate for a CFA examination is 40-50%, and it is estimated that less than 20% of candidates who begin the program eventually earn the designation.

    Due to the global need for highly skilled investment managers both by industry and in wealth management, CFA charterholders hold positions in numerous fields within the investment industry including portfolio management, research analysis, consultancy, relationship management, risk management, financial advisers, and investment banking. I am also aware of leaders within IFIE, IFIE member organizations, and IFIE partner organizations that are CFA charterholders and CFA Institute members.

    As far as growth in membership, it continues to be greatest outside of North America. The value of the CFA charter continues to grow with the number of candidates who registered for the CFA exam in calendar year 2011 (June and December exams combined) increasing five percent to 214,507. In fiscal year 2011, more than 40 percent of registrations came from the Asia Pacific region, more than 20 percent were from the Europe, Middle East and Africa region, and the balance came from the Americas, demonstrating the truly global nature of our candidate base. Information on the number and location were charters have been awarded since 1989, can be found at the following link: http://www.newcfa.org/#/map

4. What is its (CFA Institute) overall mission?

    The organization's overall mission is to lead the investment profession globally by setting the highest standards of ethics, education, and professional excellence for the ultimate benefit of society. The mission is borne out of the vision that financial markets be equitable, free, and efficient, so that every investor has a chance to earn a fair return. CFA Institute dictates that the interests of investors should take precedence over the interests of all other market participants. In order for markets to become free and equitable and for the interest of investors to be paramount, it is our belief that investment professionals must conform to high ethical principles and self-regulatory standards, in addition to industry rules and regulations.

    CFA Institute works with membership and with the global investment community and hopes to achieve its mission by: championing ethical behavior is investment markets, creating a strong community of investment professionals, being a respected source of knowledge in investment markets, raising standards of professional excellence in the industry, and building an investment industry that serves the interest of investors and society.

5. Why did CFA Institute decide to join IFIE and why does it continue to be an active member?

    In order to be effective and to make an impact in educating investors and promoting financial capability worldwide, CFA Institute needs to partner with other organizations that have a truly global presence. CFA Institute is an active member in IFIE for this very reason. Leveraging the skills and expertise of two expanding global networks containing smart, knowledgeable and experienced professionals, is extremely powerful and can help both organizations meet their goals. Toward this end, we are looking at how we might provide additional value by giving IFIE access to our members and member societies across the globe. In fact, CFA Institute is open to helping with IFIE's global-regional chapter building efforts in Asia, MENA, the Americas and in any other areas where it can provide valuable support.

    CFA Institute continues to strengthen its relationship with IFIE due to the similar missions shared by both organizations. The objective of investor education at CFA Institute is directly aligned with IFIE's objectives "to help investors in all financial markets better understand the risks and opportunities associated with various types of investments and the investment process". Being able to share ideas with like-minded individuals and other IE professionals working within a global platform has been invaluable in helping me develop and execute our IE strategy. Once again, we need to partner with compatible organizations that can help us help the global population of investors make better investment decisions and more informed choices about financial products.

6. What do you see as the roles of a global conference such as the 2013 IFIE/IOSCO one in Toronto and what do you hope participants get out of coming to this event?

    The IFIE/IOSCO Global Investor Education Conference is a great opportunity for leaders in investor protection and education around the world to come together to discuss issues and trends that directly affect how they serve their constituents locally. It allows providers of investor education access to information and other tools that will allow them to improve the creation and distribution of IE content, and the evaluation of their own IE programs. The interactive nature of the conference also allows participants to influence and improve IE programs worldwide.

    The annual conference is also focused on providing delegates with practical training and tools that they can take back and share with others in their local areas. Delegates do not only participate in programming and practical takeaways designed for their particular discipline, they are also made aware of other perspectives and expectations for the future of IE globally. By getting a diverse group of IE related professionals together on a worldwide basis helps ensure that consumers in all jurisdictions can get the tools to make more informed choices about financial products and investments.

    Because we realize its value to investors worldwide, assisting with the annual conference is one way that CFA Institute continues to make a considerable contribution to IFIE's efforts. For the past three years, CFA Institute has also volunteered to work with IFIE and its partners on the IFIE/IOSCO Global Investor Education Conferences. Due to our global reach, CFA Institute is in a position to help find speakers, sponsors and other resources to support the conference programming.

    For the past three years, CFA Institute has volunteered to work on the conference. In 2011 my predecessor helped organize the Cairo event by participating on the programme committee. Last year I represented CFA Institute by working on the IFIE-IOSCO Conference Programme committee Chaired by FINRA Foundation President Gerri Walsh for the conference held in Seoul Korea in May of 2012.

    To continue and strengthen our partnership with IFIE, this year I am acting as Chairman of the IFIE-IOSCO Global Investor Education Conference Programme Committee to be held in Toronto from June 20-21. By providing some continuity in the development of the conference programme, we hope to ensure that critical thinking about financial capability and investor education within jurisdictions and across jurisdictions is captured and disseminated. For example, the upcoming 2013 event entitled "Delivering Dynamic Financial Capability and Investor Education Programmes -Changing Behaviour Across Life Stages, will continue and bolster discussions of themes presented at last year's event and the AIFE AGM held in Delhi, India last April. It will also address the needs and concerns of members and IE professionals as determined through the 4th IFIE State of Global Investor Education Survey. By carrying forward substantive issues the committee hopes to design and produce another high level, well attended, well reviewed, agenda setting conference as was done in Seoul in 2012.

    We are also doing some pre-Conference sessions to extend the learning and engagement of the IFIE and IOSCO Global networks. As the Chair of the Committee, I am deeply grateful to all the senior leaders worldwide who are contributing their time and expertise to this effort, especially IFIE and IOSCO, who are partnering to present this conference for the 5th time this year.

7. How are you seeing the year ahead? What is on your priority to do list this year CFA Institute? What is on your priority list for IFIE?

    Last year was a foundation year for IE at CFA Institute. Now leveraging the foundation built, our focus going forward will be focused on building the requisite IE content and educational tools to create a true web presence and destination site for individual investors. We are also building the relationship with partner organizations so that we can leverage their distribution networks and so that they might take advantage of our network of members and analyst societies around the world. Our priority for IFIE is to be more involved with its events and facilities that allow investor education leaders and other investment professionals to come together to share ideas and experiences. CFA Institute can also be influential in creating programmes and other activities that can help build a greater global IE community.

8. Anything else you want to add about your vision for financial capability and investor education work worldwide?

    CFA Institute will continue to partner and collaborate with other likeminded organizations and those that have a global presence and have members in the same local jurisdictions. This way, we can work on initiatives and programmes that can work across jurisdictional lines but in many cases be tailored to be effective in the local markets. It is for this reason that CFA Institute continues to partner with IFIE. As the chairman of the programme committee am pleased that IOSCO continues to work with IFIE on building a global and global regional network of expertise from across sectors, jurisdictions and with other organizations such as: security regulators, SRO, exchanges, non- profit providers, and others who care about expanding and strengthening the financial capability and investor education agenda globally.

Check out this recent interview on Business News Network Canada with Bob Stammers about using psychology to make investment decisions




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Annamaria Lusardi

Annamaria Lusardi is the academic director of the Global Center for Financial Literacy, which develops educational tools and programs that help people become financially stable over the long term.

Lusardi, the Denit Trust Distinguished Scholar and Professor of Economics and Accountancy at the George Washington University School of Business, has advised the FINRA Investor Education Foundation, the Dutch Central Bank, the OECD, and the World Bank on issues related to financial literacy and saving.

Lusardi says teaching people the basics of money management provides them with a foundation for living in today's societies and makes them better equipped to use the services of financial advisors.

As the Director of Investor Education at CFA Institute, I caught up with Lusardi to learn more about her work.

Robert Stammers: How did you get interested in financial literacy and why is it important?

Lusardi: I began studying financial literacy almost 10 years ago as part of my work on retirement savings and planning. What struck me was that people who have similar economic characteristics and economic circumstances got close to retirement with vastly different amounts of wealth.
With the major changes in the US and around the world in the pension landscape, namely the shift from defined benefit to defined contribution plans, individuals have been put in charge of their own retirement well-being. We moved from a world in which a CFO was making a decision about how to allocate the pension wealth of individuals to a world where Joe and Jane are in charge of making those decisions. But nowhere did we stop and ask how equipped people are to make these decisions.

Back in 2002, another academic and I were able to add a module measuring financial literacy and retirement planning to a national survey covering respondents 50 and older. The module was aimed to test knowledge of basic financial concepts, such as interest compounding, inflation and risk diversification. We asked the fundamentals of financial literacy, such as questions about inflation, risk diversification and the compounding of interest. We asked people to do some simple calculations.

We found that people 50 and older had very low levels of financial literacy. Most importantly, we linked financial literacy to the capacity to plan for retirement. Knowledge is strongly related to retirement planning, and that's why in my view, people starting from the same point can end up in very different places due to their financial decisions. You and I could have the same academic degrees and the same income level, but if I invest in stock when I'm 25 and you don't, when we are 65, we're going to look vastly different.

We've taken this project global, and we have shown how financial literacy both in the US and in other countries has a strong correlation to the capacity to plan for retirement.

Stammers: How does Europe compare to the US?

Lusardi: In October, we published an international comparison of financial literacy and retirement planning in the Journal of Pension Economics and Finance. It is called Financial Literacy Around the World, and the acronym is FLAT World, where FLAT stands for Financial Literacy Around The world. As the acronym says, countries are surprisingly similar in their levels of financial literacy.

Stammers: Were there any cultural oddities that were revealed in the study?

Lusardi: We have a rich set of information, and we found that even 20 years after reunification, people who were born in what was East Germany actually have much lower levels of financial literacy than those born in West Germany. This points to how people may learn financial information. If financial concepts are not taught in school, young people learn about them from their experience and history. They may also learn from others around them (but if peers are not financially literate, there are few opportunities for learning).This is true in the US as well. Typically, people with lower education, such as people without a college degree, learn about money and finance through family and friends. But if you live in an environment where people around you don't know much, you might have a lower capacity to learn.

Stammers: If you look at planning for retirement as a lifetime project, that view requires maturity. So many people are focused on day-to-day survival. Do you have to be educated to take a lifecycle point of view?

Lusardi: Today everybody makes financial decisions and on a daily basis. Even if we don't consider pensions, people deal with credit cards and checking accounts. They are asking the questions, 'Should I acquire more skills?' How should I manage my day-to-day financial needs?' To do a good job in answering these questions, people must have a basic level of knowledge about money.

Personal finance is not just about investing in stocks. It also refers to the day to day financial decisions. Often, those people who have the lowest levels of income and education are the ones who pay the most for financial services; for example they are more likely to rely on high borrowing costs, such as payday loans, pay overdraft fees on their checking accounts, and pay fees on credit card debt.

Becoming financially literate can really make a difference in the lives of many people. One of the most important and critical decisions in life is the investment in education. If you are able to increase your income through acquiring education and skills, that makes a difference over a lifetime.

Stammers: Are you at the point where you'd call financial illiteracy a national crisis in the US?

Lusardi: I think widespread financial illiteracy is an international crisis. Governments and employers have I shifted onto workers the responsibility to save and invest their retirement money. Moreover, individuals have much greater opportunities to borrow and they must make many financial decisions on their own. But we cannot put people in charge and not give them the tools necessary to deal with this new situation.

Stammers: We saw that in the subprime mortgage crisis.

Lusardi: Yes. Financial markets and financial institutions provide great services to society. They can give us more opportunities. We have learned a lot from the mortgage market. Improving the ability of people to buy a house is great, but if you give unlimited credit to people who are not able to figure out how much they can afford to borrow, you're putting them at risk of making bad decisions. I see a parallel with the Industrial Revolution. It was a new society that required new skills. Financial literacy is like reading and writing. Some 200 years ago, states had to decide whether to invest in teaching people to read and write. It's expensive to open up schools. But that's what we have done.

For financial literacy, it's the same. The world has changed, and we need this new skill. We need to add curricula in the schools because people have to be able to make all sorts of financial decisions starting in their teenage years, including whether they want to attend college. Why are we asking students to take on $200,000 in debt without worrying or without even thinking about how much the student knows and how much their parents know when they sign the college loan papers?

Even if we put financial education in the schools, this doesn't mean that students are now in charge and they will not make mistakes. We have to be very careful about this. People will pay for their own mistakes. A good analogy is a driving license. Requiring them improves safety for everybody, but it doesn't mean there won't be any accidents.

Stammers: What would curriculum look like?

Lusardi: Here's the short version: There are lots of scientific concepts behind financial literacy, and I think it's particularly important to teach about the power of compounding interest, risk diversification and inflation.

Stammers: Who is doing a good job teaching this now?

Lusardi: We need more resources to study what types of education programs work. This is a problem in the field. Everybody wants to know what works, but nobody is willing to pay for that evaluation. So we are stuck. If you look at other fields where responsibility shifted to the individual, such as health, you see signs of progress, for instance in fighting cancer. We have gained so much knowledge that we can even hope to eradicate cancer. My dream is for the same thing to happen for financial illiteracy. This is a disease. It's widespread in society. And we need to eradicate it. We need to find effective ways to help people be equipped for their own financial decisions.

We need to make this topic engaging. Using tools that really engage the student can be very important. I have worked with a non-profit institution to design financial literacy games. It doesn't take away the rigor to make a topic fun.

Robert Stammers is the Director of Investor Education at CFA Institute, a division of CFA Institute which is actively working to teach individual investors the principles behind investment management.

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Robert Stammers