The CFA Institute has produced a comprehensive report laying out how investment professionals expect the industry to develop.
Titled ‘The Future State of the Investment Industry’, the report aims to outline the most significant themes that will impact the investment industry in the next five to ten years.
It draws on insight from 3,000 investment professionals to put forward four narratives that it says will shape the future of the sector.
Firstly, ‘Diverging Worlds’. This refers 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 narrative 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.
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Climate change mitigation will be central to this, as central banks and regulatory authorities help ensure businesses are trust-worthy and help manage systemic risks.
Digital Transformation is the third theme highlighted by the report. This is where the biggest tech trend of the current time, AI, comes into the picture. 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 say 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; ‘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.
Rhodri Preece, senior head of research at the CFA Institute, commented: “Forces that have defined the sector for years, if not for the last five decades, have begun to shift or even reverse, with economies under strain as we enter a new, uncertain, and transformational era. 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.
“The report is being released as part of the launch the CFA Institute Research and Policy Center, an initiative designed to drive engagement amongst the investment community by transforming research insights into actions on four themes: Capital Markets, Technology, the Future of the Industry, and Sustainability.”
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