Paul Smith, CFA, is the President and CEO of the CFA Institute, sponsor of the Chartered Financial Analyst® (CFA) credential. With more than 30 years of financial leadership experience, Smith joined CFA Institute in 2012 as managing director for Asia Pacific and was appointed President and CEO in 2015. Mr. Smith was able to grant an interview to ICE while he was in Jordan attending a regional meeting.
Can you describe the effect that credentialing has on the CFA Institute?
The financial services industry is going through a time of introspection and a time when it's not particularly well loved. It's nice to be part of trying to improve things and to move things forward with the view that what we actually do for a living is vital to everybody out there. We've got your savings. We've got your 401-K plan. We've got your assets in our hands. We have an enormous fiduciary duty to the general public at large and we need to do a better job of explaining that and of discharging our functions. I feel very strongly about the utility of financial services and I feel that the discourse around that has been negative for such a long time, and inappropriately so and dangerously so. We need to work harder to strike a balance.
The way we see the investment industry today is that we're an industry rather than a profession. The distinction I'd make is that industry is geared around selling things to people, whereas a profession is geared around serving your clients first and foremost and yourself second. What we're trying to do with the investment industry is to migrate it from a sales-driven world to a professional service-driven world. The foundation for that is to make sure that the people who come into the profession are not just properly qualified technically but also have good ethical training rooted in the understanding of what it means to be a profession. We see it as a journey that we have embarked upon to help our industry grow up, essentially.
Do you view credentialing as being helpful to your goal?
We think so. We see it as being an integral part of professionalizing the industry. It's very simple when you think about people who we all acknowledge to be professionals. People like doctors, for instance. When you go into a doctor's office, what's the first thing that you see? You see her or his certificate hanging on the wall. It's not optional. You're trying to tell your patients something, which is that it's safe to enter here. That is the commitment that professionals have and the certificate is the first stage in that process. It’s that and a commitment to continuing education that is the hallmark of a professional. The certificate is the entry ticket, but it has to be backed up by a lot more.
All professions obviously have barriers to entry and set high standards of qualification because that’s an important signal to our clients that we take what we do seriously, and we require the requisite amount of knowledge to begin to practice. But it's the start only. It's what you do throughout your career, your commitment to continuing education, and your contribution to the profession at large that really makes you a worthy practitioner. We try and not underestimate the importance of the credential but we also try to put it into the bigger professional complex.
What do you believe are some of the most pressing challenges that your organization has found with your certification program?
The primary risk that we face is the relevance of our exam curriculum. Are we producing the young people that our industry wants to employ? What are the skills that are going to be needed in five or 10 years’ time in our industry? How are we making our curriculum flexible and agile enough to position itself against those changing skill requirements over time? If you left the industry that you are serving five years ago to become a credentialing expert, curriculum writer or exam writer, five years down the road you really are out of touch with the industry you are trying to service. The biggest challenge is trying to make sure that the product you're selling is keeping pace with what the industry wants from the young people that you are credentialing.
Do you have advice regarding meeting the challenge of relevancy that might benefit other groups?
I think credentialing organizations by and large are quite conservative places, but we face an environment at the moment that is very fast moving. To stand still isn't the right approach, but often to move forward for a credentialing organization is quite challenging. We really need to challenge ourselves with sincerest questions around whether we think that what we're doing today is going to be fit for purpose in 10 years’ time.
We're continually tinkering with our curriculum in terms of trying to make sure that we've got the right people in the room, that we're not just talking to our friends, that we make sure that we're talking to a lot of non-charter holders as well as charter holders to get the view of people who perhaps think poorly of our teaching. We're constantly trying to challenge ourselves as we go through that process to make sure that we are on top of things.
Asking the people who aren't allies takes a certain amount of humility from the organization. Do you find resistance to that?
While humility isn't exactly our strong suit, we've tried to bring that to the organization. It's a challenge to blend end-usability with academic theory or methods. I always think that is a necessary tension. When you're running anything, you want there to be some sand in the oyster shell. You want there to be tension between the academic theory and the practical application of that theory. You need to set those juxtapositions up within the organization, recognize them, and have the humility to recognize that there are different ways of looking at the same issue. Then the job is to manage it and try to come out with an answer that makes sense for everybody. I quite like having these things to wrestle with. They are the necessary grit that helps the organization move on.
What advice would you give to other CEOs given the experience you've had?
What I've found successful is to think about a credentialing organization as a business and to say that at the end of the day we are owned by our members – the people we have credentialed – and they are our shareholders. They deserve a return on their investment in us. The challenge with a credentialing organization is that you can become quite introspective, whereas a business naturally is very outgoing in its life. If you're failing to understand your customers you go out of business very quickly. What I found most useful and most refreshing is to try to turn things on their head and say, “Let's think about it from our stakeholder perspective first and last. Let’s be more businesslike in our approach.” Don't accept the people within the organization who say things like, “We're a credentialing organization, not a business. You wouldn't understand; it's different here.” That is my advice. It's not different; it’s the same. Run it like a business.