November 22, 2010

CFA Chairman Marg Franklin: The Move to Private Client Wealth

Franklin speaks about the 'Seismic shift to the individual investor'

Marg Franklin, CFA,  has had a busy fall. In addition to launching her new advisory firm—she is president and CEO of Kinsale Private Wealth, Inc. in Toronto—Franklin took the helm of the CFA Institute, as its chairman, in September. She has been a member of the Institute’s board since 2004.

At Kinsale, Franklin and her partner firms, Marret Asset Management and Arrow Hedge Partners, manage about $5 billion in assets. But this didn’t happen overnight. For eight years, Franklin was a partner at KJ Harrison & Partners, and she spent more than 10 years in asset management for institutions. At Altimira Management, Franklin  was a managing director of institutional asset management, and was responsible for “setting portfolio strategy and ensuring implementation of and compliance with portfolio mandates” for the firm’s institutional clients, according to the CFA Institute’s website. Franklin holds a BA in economics from McMaster University.

The CFA Institute has “100,000 members” around the globe, and “200,000 candidates,” Franklin says, for what is widely considered to be the most rigorous credential in the investment world.

It takes an average of “four years “ to become a CFA charter holder, according to the CFA Institute’s website. The Chartered Financial Analyst (CFA) charter is “written” as three separate exams, each with its own preparation of “about six months.” But the 10-year average passing rate for the Level I exam is 39%; for Level II 44%; and Level III 59%, and the numbers of candidates drop with each level. So while more than 577,000 candidates took the Level I exam between 2001 and 2010, fewer than 144,000 candidates took the Level III exam in that time period. Fewer than 85,000 candidates passed the Level III exam in the last decade, to become charter holders.

But those who do achieve this distinction are very well prepared to tackle what Franklin calls the “seismic shift to the individual investor.” There is a “migration of real, significant resources to individual investors,” from institutional investments,” she adds. In the past, most CFA charter holders ended up on the institutional side of the investment business. Until recently, it was relatively rare for individual investors to have a CFA charter holder advising them. No so anymore, explains Franklin.

For the benefit of individual investors—there is “very thoughtful work on risk management,” Franklin notes, and “lifecycle investing,” happening in the CFA world. Wealth advisors are considering the “human capital” element if risk for investors—the “volatility of income” as Franklin calls it, meaning how likely is that this investor will encounter the “tail risk” of being out of a job for some period of their working lifetime?

Tools for Practitioners

She sees part of the important role for the CFA Institute now as getting “practitioners the tools to be really excellent,” well-prepared for their role as advisors to investors, “deeply knowledgeable.” That’s something she asserts that the “Series 7,” Finra’s general securities examination for licensing as a broker, does not do. Brokers who are Series 7 licensed can, of course, go on to do the work required to “write” their CFA. 

Franklin also says that “investors need to understand what a CFA is and does—the depth of knowledge,” that CFA charter holders amass in achieving this credential, and the “lifelong learning” that goes with it. Now that more CFA  charter holders are thinking  “in the context of,” practitioner career paths, advising “individual investors,” if Franklin has anything to say about it, investors will soon have that understanding.

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