← Jill on Money with Jill Schlesinger
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- [00:00]
Jill Schlesinger
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- [03:22]
Marg Franklin
Great. So CFA Institute, often people think about it as the professional body professionals and those working in the investment ecosystem. So our mission is to lead the investment industry with the highest standards of ethics, education and professional excellence for the ultimate benefit of society. And it's those last six words that I think we're going to touch on a bit today. And we're probably most well known for our CFA program. So for those of you who have advisors or have been in the, you know, experienced invest investments, you might have run across a few people who have their name comma, cfa, and I am one of them.
- [04:07]
Jill Schlesinger
And you that just means they're very smart. Here's what happened. Okay. When I was in the business 150 years ago, my then business partner said to me, look, you either can get the CFA or the cfp. And I was like, oh my God, the cfa, that's hard. No way. And my sister had the same choice when she was in investment banking, where they said, you can get an MBA or a cfa. She goes, oh, no, I'll do the mba. It's much easier. So can you talk about the rigor of the exams?
- [04:37]
Marg Franklin
Well, I think there are really two aspects to it. One is the breadth of the program. It really does cover all aspects sort of in that investment ecosystem, including private wealth and private markets. And there's certainly overlap with private wealth and private markets. And then there's also the depth of it. So, you know, it's a rigorous program and it's rigorous testing. And I think that actually is what really drives its value is the content, the curriculum, the applicability, the comprehensiveness. But then there's that validation and evaluation. And I think that's really where it comes from. And I would say our 200,000 plus members around the world recognize the value of it because it is, it is. It's got a great reputation and it is recognized everywhere in the world. So I think it's all those things together.
- [05:36]
Jill Schlesinger
Mark, why do you think that more people go into the CFA who are real money manager types rather than the planning part? I mean, I know there are people who have both, but it seems to Me that, you know, the kinds of folks who want to be CFAs are like my friend Michael Batnick from Ritholtz Wealth Management, like he wants to be all in the investment side. But what is it about the cfa, that part of the world that wants that designation? Because it does feel like it is rigorous, but it is real investing focused. Right.
- [06:10]
Marg Franklin
So first of all, if we look at our members, actually, you know, I would say about 30% of them, 35% of them are in the real core, what people would consider the real core of investment management. So a research analyst, a security analyst or portfolio manager. We actually see a lot of our membership who would identify as being in the individual or private wealth market. I think, you know, part of the rigor, that reputation for rigor can be a bit daunting. My own view is that it's a real privilege to, in one capacity or another, manage people's money. You know, you think about how hard it is for people to save that money and then, and then hand it over to us, trusting us to put their interests first, to be able to professionally put together programs that work no matter what our area of specialization is. And I think that the CFA has great applicability for it. Jill, when you and I were at the Future Proof conference, one of the things we talked about was that when we started in the business, the institutional part of the business, pension plans, endowments, foundations, really made up the vast majority of the capital. And over the last 30, 35 years, that's really changed. And individuals are now so much more responsible for their own financial well being and security. And that requires a level of professionalism, a level of competence, and a real ethical orientation to ensure that that happens. Well, and if it happens, well, it makes such a difference not just for individuals, but for society. If it goes badly, it's, it's got really serious consequences.
- [07:57]
Jill Schlesinger
So if you look at this designation and it is hard and it's rigorous, and let's just say that, you know, you're a schlunky broker listening to this program and you like, oh, I'm so sick of Jill yelling at me that I'm just a schlunky broker and you want to, you want to step your game up and one of the pushback that you could get from somebody who's in that situation is like, oh my God, it's so hard. So how can someone, somebody make the leap without being daunted by the process?
- [08:28]
Marg Franklin
So that's a perfect segue into the way we think about the whole arc of A career in professional development and learning. And that is that when I think about the CFA program, it really is often at that career entry or early part of your career, and that's where the breadth and depth come into. But for many of us, we will have changes in our career or we'll have the experience that puts us at a really different spot. And so we have, over the last two years, expanded our portfolio to provide certificates in specialized areas that meet the needs of investment professionals to skill reskill and upskill over the course of their career. And this summer, we'll be launching our private wealth certificate we undertook in the CFA program itself to offer in Level 3, a pathway that think about it like an elective dedicated to private wealth. And this is a certificate that would be, for instance, for somebody just like me that had started in institutional. Think about something very simple. Institutional investors don't really face, generally speaking, tax consequences. It's not a consideration in how you are allocating and locating assets. You know, how you think about structuring the investments. The minute you get into taxation, you're having a very different. A very different problem set. And so, you know, there was. There was a cfp, and in Canada, I did the pfp. This really brings those more expanded investment principles more deeply through the certificate to, for instance, your broker, who may now be moving from transactions, you know, buying and selling securities to providing advice, moving more into that advisory capacity. And this is a really good program, will be a very good program program for. For that kind of person.
- [10:44]
Jill Schlesinger
I'm excited by this because instead of taking the three horrible exams, are you saying that Mark and I can do a certificate and would that. And I guess the other part is that if that certificate satisfied, continuing ed for cfp, like, all the better. So I know you brush elbows with our friends over at the CFP board. Is there some sort of integration that you could potentially see going forward?
- [11:08]
Marg Franklin
I could look. We have a great relationship with cfp. Their CEO, Kevin Keller, and I speak frequently. They have a charter holder and CFP designation holder for both their outgoing and incoming chair. I think there is great commonality on raising professionalism, on the ethics, putting clients first, transparency around making the professional advisor better. And I think there's lots of opportunity for us to collaborate and combine. And I think there's an intent and spirit there. What I do appreciate about them and us is this very collective view that it's really important to get the planning and the investing and the program for individuals well done and that we are both committed to making the Profession better in myriad ways, both what's happening now and then what we see prospectively.
- [12:15]
Jill Schlesinger
If you're designated with this, if you're a Chartered Financial analyst, you are held to the fiduciary standard, are you not?
- [12:24]
Marg Franklin
We are.
- [12:25]
Jill Schlesinger
So that's always been the case from way back when, from. From like the beginning, right?
- [12:31]
Marg Franklin
Absolutely.
- [12:32]
Jill Schlesinger
Okay, so what is the situation right now with fiduciary as you see it on the landscape? I mean, so if you have a CFA or you have a CFP or a cpa. Right. Those are the three. There are a lot of people who don't. So what percentage? Give a guess. I don't even know what the answer to this is. But what do you think is the percentage of folks who are providing ongoing investment advice or wealth management or financial planning who don't have the fiduciary, who are not subject to this fiduciary duty?
- [13:06]
Marg Franklin
I suspect it is.
- [13:10]
Jill Schlesinger
Don't hold her to this gang.
- [13:11]
Marg Franklin
Don't hold her all. Caveat emptor, all that. I would bet it's more than 50% who are not held to a fiduciary duty.
- [13:20]
Jill Schlesinger
So I was going to say I wrote down 50%. That's about what I think as well. And how do you feel about that, Mark? Just slam everybody right now. Do it.
- [13:27]
Marg Franklin
Well, yeah, I think it's unforgivable. And I'll tell you what I do. I think it's unforgivable. And the reason is you can't expect individuals who have other occupations, other things that are taking their time in their mind, and they've hired us to provide good advice. They've hired us in the expectation that they're going to act in our best interest and put us ahead of their own. You know, ahead of an advisor's or somebody else's interests. I don't think that's an unreasonable expectation. And so if you think about not being bound by that obligation of care, loyalty and compliance, I think that you find level of distrust that can be warranted. And it doesn't mean that people who aren't abiding by a fiduciary duty are not, maybe not acting that way, but it doesn't give you trust that at the moment things get difficult or you're faced with choices that you don't have a very clear bright line, which is the client interest ahead of your own.
- [14:46]
Jill Schlesinger
Right. We can't, we cannot guarantee that every cfa, CFP, or CPA is who is held to the fiduciary duty. They could still be lousy Advisors. I just want to be clear about that. But I think that when you have that notion that somebody is putting me first and my interest first before the advisor herself or the organization for whom she works, that does give me some sense of comfort, right? If all of a sudden I'm thinking, well, it's like I'm walking into a car dealership and I'm asking the Hyundai dealer to say, what's the best car? I mean, I'm pretty shocked to hear that they're going to say the Hyundai. And I want to know what is the best car for me. And so I do think it's like that nice. At least it's that hurdle. But if you're listening to our program, so often people who are. Who are, you know, like, into us, they love doing it themselves. But we have recently been getting a number of questions about people who say, like, look, I'm a do it yourselfer, but my spouse isn't, right? And at what point should people think about engaging somebody who is a CFA or a cfp, a professional, when they're worried about either their own cognitive decline or they're worried if something were to happen to them, the spouse is left with a pile of crap, right?
- [16:08]
Marg Franklin
Well, you know, first of all, Jill, great for you to call out those broader considerations. Right. And I think about it in two different ways. And as you know, I spent really quite a bit of time before assuming this job in the private wealth in the individual advisory business, both as somebody who advised people and then ultimately as running businesses. And I would make two observations around that. One. One is that oftentimes there is in the family a primary person, if they're a do it yourselfer, that gets addressed oftentimes way too late in the game, and there's not enough forethinking around what happens. If I'm in my 40s, my marriage falls apart, for instance, or my partnership falls apart, or some tragedy befalls us or whatever it is that can disrupt the best plans. And there's no support system there broadly for people who don't have the skills and capabilities. And by the way, that's not just exclusive to the individual investor. We see this lots of times in, for instance, endowments and foundations, right, where people come and go off the directors. And you can see that programs weren't designed to endure for the objectives and without key person dependency. And so I think that really thinking about that earlier is appropriate. Oftentimes where we see people engage advisors is when the complexity gets. When things become more complex. And that can come from a number of sources. One, you now have more wealth. And so it's not, you know, you have different options and different objectives. And that's usually a point where people really start to think about getting an advisor. And I'll give you a really good example when we are. When I'm out talking to people in the industry, when I talk to firms, you know, a lot of people will start out, for instance, with a robo advisor. They just don't have enough money to warrant the fees. The complexity isn't there. But oftentimes they'll go along and at some point they do have more money and they have different life circumstances and things have become more complicated. It's not quite as simple as all of that. That's kind of the stage where people progress into having an advisor. And I would just suggest that with CFAs, that tends to be. And CPAs, that tends to get into that higher net worth, you know, ultra high net worth space where there's really a lot of complexity. Oftentimes those people work in teams. So you'll see CPAs, CFAs, and CFPs working together on a team. And oftentimes you'll have an attorney as well at the table.
- [19:17]
Jill Schlesinger
So, you know, you've been doing this for a while and as you said, you walked into the financial services industry and you did so with what, like, what was your motivation when you got, when you came in? Like, what were you thinking? I'll tell you what I was thinking. You first.
- [19:33]
Marg Franklin
Well, I don't know that I was thinking about the financial services industry.
- [19:38]
Jill Schlesinger
What are you thinking about? You're like, I need a job.
- [19:40]
Marg Franklin
Totally. Like, I came out in 1987. I think I'd had five jobs before I got to State Street Global Advisors. And I got there because the HR person for a Gannett outdoor media company where I was doing market analysis knew the HR person at State Street Global Advisors and they were setting up shop in Canada. And what I could do is what is now known as Microsoft Office. I could analyze, I could write a report and I could do a pretty presentation. And they were looking for those skills. And I will just say, as my brother reminds me, I've never seen anybody make such a success out of being able to do Microsoft Office. When I got in there, I loved it. Your turn. Your.
- [20:31]
Jill Schlesinger
Oh, well, when I got in, I was, you know, I had like two different ideas. When I was in college, I was interning at the local NBC owned and operated station in Providence, Rhode island. And I was like the sports intern. So I was, like, logging basketball games for Providence College or something, you know, like, whatever. And then in the summers, I'd work for my dad's firm. My dad was a specialist on the floor of the American Stock Exchange, and his best friend was a specialist on the floor of the New York Stock Exchange. So I had those jobs. So the summer after my junior year, I had a job at my dad's firm. And then for six weeks, and then six weeks, I worked for Katz Communications. And let me just give you the drill down on this, since you're a bottom line kind of gal. At Katz Communications, it was an internship. They literally gave US$20 a week for subway fare. That's what we got. That was it. There was no, nothing, zero. And my dad's firm, we made a certain amount of money as clerks. And then it was a very hot month for trading. And I got a $5,000 bonus in 1986. The summer of 1986. So here's how I made my decision. Wow. One place, it cost me money to work, and the other place, they paid me to work. And that's what I. That's how I entered financial services. Like, it seems better to get paid than not. Also, I was a little bit concerned that if I was going to be a sports producer, which is what I thought I was going to do, I'd have to move to somewhere in some teeny, tiny market. And I knew I could not do that. So that's how I started. And I never got into, like, personal finances, to me, was so far from my thought process. But then I was a trader, and I was in the commodities exchange. And, you know, it's disgusting business, and the floor itself is sort of a crazy place, and it's. It's just nuts. And so when I got into financial services, which was, you know, probably seven or eight years later, I was just sort of mystified that there was a whole industry of people who were supposedly helping people get where they wanted to go, but they really were enriching themselves. And what I really noticed very quickly, because it was like the 90s, is that knuckleheads were making tons and tons of money as brokers and insurance salespeople, and their customers or clients were really at the farthest end of the participation in that. But they all got lucky because it was a huge bull market and everyone made money. So I became like an evangelist for CFP and fiduciary. But I felt like I was really, you know, even after the financial. Even after the dot com boom and bust, and all of that. But it was the financial crisis that really kind of blew my mind that so many companies just would not adopt fiduciary standard. And it bummed me out. And so I continue to be bummed out by the fact that probably about half of the people who are out there giving advice are not held to the fiduciary standard. And you know, to me I felt like, wow, people who have normal amounts of money, I wish they could get normal advice.
- [23:39]
Marg Franklin
So, Jill, first of all, I think keep the faith and keep the evangelism going. And I'll tell you why, because you and I entered the market in a world where inflation was high, interest rates were high, and GDP was where it was. And then interest rates started to come down. We got in after the peak of Volcker's response to inflation, which was to jack up interest rates and to really almost kill the patient in trying to bring down inflation. So we got declining inflation, declining interest rates, and the Berlin Wall came down. And you know, we got the impact on gdp, like staggering GDP growth because of the unlock of Chinese, you know, cheap goods, cheap labor, and you could now export and then the, and then Eastern European stem talent, you know, engineers, mathematicians, all that kind of stuff. And costs came down. And I would say 35, 40 years later, that long term trend has ended. So now returns are going to be harder to come by. The market isn't going to carry us. And we're just in, we're really, I think, now entering that very different period of time. And you can the leading indicator for that is taking a look at what the most sophisticated pension plans are thinking about. I started my career in pension plans. So unlike you, I got to see really the great part of the business. And I'm Canadian, I come from a very large family. My husband's part of a very large family. And I would say right now half of our families, the better part of the adults in them, are covered by the Ontario Teachers Pension Plan and Canada Pension Plan Plan. And you know, those are sophisticated systems that are able, you know, over really long periods of time to provide people with a good, stable and reliable income stream because of the way they've structured themselves. Because of that, I would say fiduciary duty. And I think that it's now a time when, broadly speaking, the investment community and especially advisors need to be equipped to deal with a fundamentally different market. You know, I was talking to the chairman of one of the world's largest financial institutions and certainly one of the world's largest wealth management platforms. And he said, marg, the average age of our clients is 59 and the average age of our investor is 57. That is not going to meet the needs of the future. And I think we talk about this great transfer of wealth and I think, you know, we anticipated it would come a particular way and it's materializing very differently.
- [26:36]
Jill Schlesinger
We'll have more with Marg Franklin tomorrow. If you've got a question that comes up after listening to this, feel free to give us a Holler. Go to jillonmoney.com Click the Contact Us button and of course, let us know if you would be willing to come on the air live with us. You can subscribe to us on the Odyssey app or wherever you find your favorite podcasts. Try to do something nice for someone else today. Change your work, change your wealth, change your life. Thank you for listening. We'll talk to you tomorrow. Hi, this is Jill Schlesinger. Being a business owner means you're always on adapting, innovating and making big moves to take your vision to the next level. You need solutions that match your pace, offering flexibility, rewards and tools to help you keep going strong. That's where the American Express Business Platinum Card comes in, a partner for navigating today's business world. You can have a flexible spending limit that adapts with your business, plus the ability to earn one and a half times membership rewards points on select purchases so you earn rewards that can take your business further. See how the American Express Business Platinum Card gives business owners like you the tools and rewards to do more of what they love. Not all purchases will be approved. Terms and points cap apply. Learn more@americanexpress.com AmExBusiness Water damage is no joke did you know that water damage makes up more than 25% of all home insurance claims? And the average claim costs over $13,000. Don't let a small leak turn into a big expense. Learn more at go.pemco.com Nojoke Pemco Mutual Insurance Co. Seattle, WA.