Big Ideas: Evolving Trends and Skills on the Minds of Investment Professionals

What is happening to the investment industry? Where are we heading? How can I keep up? And, more often, how can I stay ahead of the curve? I attended more than 100 events for CFA Society Chicago in the last year, and nearly every time I find that small talk between CFA charterholders quickly turns to big ideas such as these.

We’re an analytical group, so it comes as no surprise to me that most of our members already understand that the investment industry is rife with change. Many already feel it in their daily work. And as I move between conversations and events, I know that no professional is more prepared for the future than a charterholder.

Take technology, for example. Blockchain, robo-advisors, high-speed trading, you name it; it’s impossible to deny their growing presence in our industry. These forces, along with the emergence of passive investments and ETFs, have put downward pressure on fees. This is great for investors as they will be able to gain more from their investments. However, these forces also put downward pressure on investment companies’ revenues. This leads to an arms race to collect assets, increase use of collective investments (as individual stock analysis is expensive), and ramp up technological investments.

Technical competence is essential to help investors navigate this rapidly changing environment. Starting in 2019, the CFA program curriculum will contain questions on data mining in order to keep this technical edge sharp. For future years, CFA Institute is even considering artificial intelligence questions. At CFA Society Chicago, we have and continue to explore these topics for professional development sessions that keep our members up to speed.

However, technical competence is not enough. As the needs of investors and the nature of investment practice change, ‘soft skills’ are becoming just as essential. Skillful client communication and presentation, brand building, networking, leadership, and improvisation are often needed to provide maximum value to clients. CFA Society Chicago members have already begun taking advantage of the new soft skill workshop developed by our Professional Development Advisory Group.

Ethics, though, will be the skill that will keep us on the right track. Confidence in our profession can only be built through a commitment to a high standard of ethics and embracing rules that protect the rights of investors. Charterholders already lead this charge. Charterholders are already rigorously trained in ethics and embrace the Statement of Investor Rights as drafted by CFA Institute. Furthermore, CFA Institute is a staunch advocate of a universal fiduciary standard.

Whether technical, “soft,” or ethical, every challenge our members see presents an opportunity to demonstrate their skills to meet them – some new, and some old. It’s just another chance for charterholders to prove their value.

FINTECH EXCHANGE 2017

Hosted by Barchart, the third annual FinTech Exchange held on April 27th at Venue SIX10 highlighted the latest in technology innovation for financial markets and trading firms. The 2017 event focused on methods in which data is delivered, stored, analyzed and visualized; as well as the new types of data in the alternative space. It featured 10-minute Lightning Round presentations, topic specific round table discussions, plus an all-day exhibit hall for networking that featured a Live DJ and Pro Ping Pong action.

Barchart’s CEO Mark Haraburda, delivered the opening remarks and highlighted the fact that Chicago was ranked among the top five FinTech hubs in the world by Deloitte. In Deloitte’s published report, Connecting Global Fintech: Interim Hub Review 2017, Chicago acts as the epicenter for all FinTech activity in the Midwest, representing well over 20,000 financial institutions.

The keynote speaker was Vaidy Krishnan from Tableau, a software company that helps people see and understand their data. He spoke about choosing an analytics platform that not only offers data visualization, but also can provide visual analytics that help you dive into the “why” of your data. Data visualization tools such as static dashboards are the start of the analytical process and not the end; while visual analytics software go a step further and provide interactive exploration of the data to its most granular detail.

The Lightning Rounds began with Maria Belianina from OneTick speaking about the power of integrating with a single point platform for tick data management and analysis. In addition to being a data warehouse, OneTick is directly integrated with R and MATLAB for quantitative analysis.

Julie Menacho from the CME Group spoke about the exchange’s market technology and data services. CME Datamine offers historical data via the cloud through a partnership with Amazon Web Services and software provider TickSmith. She then went on to discuss the CME’s initiative around Alternative Data, which she described as non-traditional data sources which can be leveraged as part of the investment process. One example was satellite imagery of where world oil tanks were being stored to give an idea of the current supply of oil. These new sources of untapped data can be a predictive indicator of market performance.

Sean Naismith from Enova Decisions talked about harnessing the power of predictive analytics. He spoke about their decision management system Colossus, which is integrated with multiple data providers to help produce optimal decisions in real-time. These predictive analytics are used to help detect fraud, minimize credit risk, and optimize operations in real-time.

Catherine Clay from the CBOE discussed how the CBOE is keeping its innovative mojo, through the two P’s, Process and Partners. She described the CBOE’s weekly development release cycle to push out code related enhancements. She also went over the CBOE’s technology partnerships that allow the exchange to expand their market data and product offerings.

In honor of National Bring your Child to Work Day, Jim Austin of Vertex Analytics decided to put his kids to work! They put on a fun re-enactment of a chaotic open outcry where all you heard was the fill order. Jim used this to highlight the amount of undocumented activity that can occur during trading. He then brought us into today’s world of big market data and electronic trading. Vertex provides a solution to capture, manage, and analyze this financial market data, currently collecting over 4.5 billion market messages per day. Firms can also use Vertex’s platform to supervise their own trading patterns and behavior, which can be used to mitigate compliance violations.

The final two presentations focused on how FinTech is disrupting retail trading. Tim McDermott of Nadex, highlighted the key issues that hold individuals back from trading. These key issues included margin requirements, fear of professional traders, time constraints, and an unclear path on how to begin. Nadex offers small binary option contracts with a floor of $0 and a ceiling of $100, limiting a trader’s overall risk. It’s also easy to open an account and begin trading if you pass all the checks, usually within 15 minutes. Michael Patak from Topstep Trader also believes there’s a lot of opportunity in retail. He believes that by combining education with games, you can attract new traders to the marketplace. TopStep Trader provides a path where you can fine tune your approach using real-time simulated accounts.

I attended one of the roundtable sessions led by Jason Henrichs and Lisa Curran, CFA, from FinTEx, a Chicago based nonprofit, and learned how they’re growing the FinTech ecosystem in the Midwest. Lisa went on to speak about how FinTEx is focused on promoting collaboration among their member firms and modeled their events to resemble those hosted by CFA Society Chicago. Jason discussed their partnership with FinTech Sandbox, a nonprofit group that provides startups free access to financial data and infrastructure. This partnership should provide a boost to Chicago’s already surging FinTech sector.

This was my first time attending the FinTech Exchange but it will not be my last. I wasn’t aware of the vast amount of innovation occurring right here on our doorsteps in Chicago, and I’m excited to see how these new sources of data impact the Financial Services sector.