CEO Profile: Paul Smith, CFA, President and CEO of the CFA Institute, Part 2

Interview by Lisa Everts, Strasz Assessment Systems 

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 financial leadership experience, Smith joined CFA Institute in 2012 as managing director for Asia Pacific and was appointed President and CEO in 2015.  CFA Institute offers its credential internationally which presents many challenges. Previously, in part one of this interview, Smith shared his thoughts on the value of credentialing, as well as organizational challenges. Here, in part two, Smith discusses his experience regarding the challenges and rewards of working with a global view.

See Part 1 of this interview here. 

Can you describe the goals of CFA Institute centering on credentialing and the financial profession?

We are trying to shape the organization into three areas. The first is credentialing. The credentialing team creates the raw material that we turn into the young professional. The middle piece of what we do is focused on member value. How do we help our members be the best investment professionals that they can be throughout their career? We offer professional development, through brand recognition, community building and career support. The final piece of our organization is fixed around what we call advocacy. Simply put, advocacy is how we work with regulators and other policymakers around the world to create an industry environment that is supportive of professionalism – geared toward protecting investor interest, toward a healthy market that's fair to everybody. We have structured ourselves around those three pillars of activity. Credentialing being the first, member value being the central pillar and then advocacy to help us make the market as successful it can be.

I understand your group has been expanding, which includes international growth. What are some of the challenges you've been facing?

We're lucky in the sense that we started our international expansion about 30 years ago, with our first office on the ground 15 years ago in Hong Kong. For us, international expansion is not a new thing. It's picking up pace for sure, but it's not new. The challenges, I think, for any U.S.-based organization is having a broad worldview and an understanding of the way other people do things, and why other people do things the way they do. Having that curiosity and saying that certain things we do need to be flexed locally is a challenge in a U.S.environment. I'm the first non-American to have this role and the first person not to actually live in the U.S. That is symptomatic of what we're trying to do as an organization, to demonstrate that we're serious about delivering to a global audience.

This is easier said than done, and even more difficult when a large portion of our audience responds to our credential because it's American. Young people in Africa, for instance, take our credential because we're strong in North America, not because we're strong in Africa. We are trying to make the credential and the member value more useful to people who are practicing in Africa as investment professionals. That needs to be thought through from a local perspective. 

It's a very interesting exercise, where certain things are necessarily kept American and other elements need to be customized effectively. Trying to communicate this concept to people and get buy-in from staff that some things must be done differently to accommodate different ways of looking at the world – that's always a challenge. 

Often we get criticized by our global clientele for not moving quickly enough or being too American. As you come out of the U.S., you have a range of possible political problems, different government regimes or different legal regimes that can sometimes be difficult to predict and hard to manage. A variety of things can go wrong and need to be managed, but it's what makes life fun at the end of the day, and I think comes with a huge payoff.  

When you think about what a credentialing organization like the CFA Institute does, although we're non for profit, we sell aspirations to young people. That's the heart of it when you boil it down. We're selling the hope of a better future to the next generation. When you look at the world's demography, where are the world's youth? They are in the developing world and not the U.S.or the U.K., where I come from. They are in Latin America, Africa and Asia. That's where you're going to drive your credentialing business over the next generation. It's not going to come out of aging demographics and where there are other alternatives. Global expansion, if you like, if you see your world in those terms, is an absolute necessity and we are very fortunate that we moved into the global universe a long while ago. All I've done is to continue to develop it.

How do you handle the concept of having one credential and being able to localize it simultaneously? Do you offer more than one test?

No, we don't. We offer one exam in one language globally. It's only in English and it's the same test no matter where you take it. Coming back to what I said earlier – there are lots of different models you can pursue and there are plenty of credentialing organizations that localize or present different languages. Our selling proposition is saying to young professionals in China or India, for example, that the exam they are taking is exactly the same for someone in New York. If you pass this credential, you are as credentialed as any peer in the U.S. That is what drives students forward. That, I would say is probably the biggest driver of all and why I said earlier that we localize our member value experience, but in essence people are taking this exam because it's strong in the U.S. So we have an interesting world, if you like, in that we have to balance the Americanization of the curriculum product with the needs to be globally relevant in the way we service our members once credentialed. While trying to be globally flexible, we must also recognize that the key driver of our candidate base is the fact that our credential is well recognized in the States.

Not having to translate the exam changes what your psychometricians have to evaluate. There is no translation, but are they looking at how different regions perform?

We're very thoughtful and spend a lot time in terms of the language we use. Our mantra is that this is not a test of your English language skills. You have to have facility in English in order to master the material, but you don't have to be William Shakespeare. We are not trying to trip you up with how questions are written. Our question writing teams are spread all over the world and we work very hard on each question to make sure the English is going to resonate whether you are in the Philippines, Japan, or Brazil. We try to iron out all ambiguity. We use a very simple vocabulary to make it a test of their investment knowledge, not a test of their English language skills.

Finance is a global profession and a globalized industry in many ways. English language is the lingua franca of the industry. Often employers in non-English speaking companies like the fact that we are an English credential because it also demonstrates that their staff have gained proficiency in English. If we tried to move into local language provision, not only would we have a challenge of making sure each version of the curriculum was standard, but we would also run the risk of being competed away in the local market by people who are more proficient in local language and distribution than ourselves. Our unique stand is that we are an English language designation. We have always fought the temptation to move to local language provision. That's our market niche.

We offer this exam in 155 countries worldwide, including India and China, which each have multiple languages alone. We have to ask ourselves, where do you stop translating? 

Our curriculum is updated every year, as well. We may only update five or six percent of the curriculum each year, but that itself imposes an enormous ongoing language burden if you're delivering more than one language. By the time you add it all up, from the inaccuracy that might creep in with translation, the competitive issues, and the sheer cost of maintaining multiple versions of questions, that is a serious undertaking.

How do you go about making sure that the test is relevant locally and globally?

We use an activity called practice analysis. This is where being an aspirant credential helps. We have a lot of credential holders and professionals who see keeping our curriculum relevant as a contribution they can make to the profession. We have a team that tours the world on a regular cycle, taking pieces of our curriculum each year out to focus groups to make sure that the curriculum, the subject matter and the orthodoxy of the teaching is relevant. We've been doing practice analysis for many moons. We enjoy the process and feel that it keeps us up to date.

You stated you are the first non-American to hold your position.  How did you become involved with CFA? 

I was running my own asset management business in Hong Kong and I was thinking about what to do next. I was in that stage in my 50s where I was wondering, is this it? Is there another rodeo to go to? By chance, someone introduced the CFA to me. They were looking for someone who is in Asia and has Asian experience. They explained that the CFA was expanding fast in Asia and wanted to bring in a more business focus to what it was doing in terms of the curriculum and in terms of how stakeholders were treated. My profile fit that need, and I accepted the role. It was a response to the opportunity. I was 53, having spent 30 years working [in the field], it was time to apply my experience in an environment where I could help the industry move forward. It was a good time in my life to have the opportunity. I haven't regretted it for one second!