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Ethics, Robots and Women on Boards – Hot Topics for the Future of Financial Services

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Written by: Kate Bailey

The importance of ethics in financial services, the future of robots and artificial intelligence and the undeniable benefits of having women on boards: these issues and more were explored at this week’s Australia Investment Conference held by CFA Societies Australia (#CFAAIC2015, for those following on Twitter).

Over 400 delegates attended to the conference, themed on ‘Going Back to Fundamentals’, to hear speakers such as Greg Medcraft, Chairman of the Australian Securities & Investments Commission (ASIC); Philip Lowe, Deputy Governor of the Reserve Bank of Australia (RBA); and David Murray, AO, former CEO of the Commonwealth Bank, Chair of the Financial System Inquiry and now Senior Adviser at Credit Suisse.

For those of you who missed it (BlueChip didn’t) here are some of the juicier highlights.

Professionalism (Regaining lost trust – a roadmap for change in financial services) 

Presented by Paul Smith, President & CEO of CFA Institute

Australia’s reputation as a beacon of world-class prudential and corporate regulation was cemented in 2007 when our financial system fared better than many other developed nations in the fall out from the global financial crisis.

Yet, said Mr Smith, the industry’s internal culture is now threatening this hard-won respect. The ‘enemy within’ must be addressed by the whole investment industry by:

  1. Setting high standards of entry, and demonstrate professionalism
  2. Creating business models geared towards achieving investor outcomes
  3. Advocating for regulations which align firms and clients
     

CFA Societies in Australia and New Zealand have developed an ‘ethical map’ aimed at building an investment culture based on ethics, market integrity and technical excellence, which they are seeking to share globally, with the help of CFA Institute.

Now is the crucial time for Australian financial services. Culture is the issue.

New technologies: creative destruction on steroids 

Presented by Ken Lee, Head of Asia and Managing Director 13D Research 

Productivity, employment, the labour market and real GDP have traditionally moved together but over the last decade they have started diverging – and there are more reasons for this than the usually cited outsourcing and growth of China, according to Mr Lee.

Artificial Intelligence (AI) and robotics in particular are having and will continue to have a significant impact on the way humans live, he said, highlighting several examples.

  • An article can be written by a robot. IBM’s thinking machine, called Watson, can beat you in Chess or read 60 million pages of text per second.
  • It would take Watson just one minute to read all the 16 million books in the Library of Congress in Washington.
  • Pepper the Robot was interviewed by a human journalist. The robot joked to the journalist about borrowing 10,000 yen from him.
  • “A robot at home will be as common as televisions are now in five years’ time … the first need for them will be aged care,” Mr Lee predicted.
  • “If you look at all the data created from the dawn of time until 2003, Google creates as much data now every 2 days.”
     

Mr Lee emphasised that humans have to connect the dots between the different types of knowledge that machines produce. The machines do not have emotion, or the ability to think laterally yet, and they don’t understand entrepreneurship.

“Two billion jobs could be replaced by AI and robotics – it could be more dangerous than nuclear weapons. There are likely only two types of jobs in the future: you are the manager of robots or you are managed by a robot,” Mr Lee warned.

The high cost of gender imbalance and what to do about it

Presented by Heather Brilliant, CEO Morningstar Australasia

Heather Brilliant’s address focused on the financial and other data-proven benefits of having a balance of genders in the investment workplace.

Data shows that diversity can lead to better investment outcomes, she emphasised. It shows that neither women or men are better portfolio managers, but that mixed teams outperformed men or women alone, creating an obvious case for a balance of genders in the workplace.

Ms Brilliant highlighted that:

  • Companies with more than one woman on the board performed at a compound 3.7% a year higher rate than those with none
  • Companies with the most women board directors outperformed those with the least by 26%, on an ROIC basis
  • Companies with the highest share of women outperformed companies with no women
     

Ms Brilliant added that CFA Institute has launched the Women in Investment Management Initiative to:

  • Encourage women into the investment management profession
  • Support those that have joined
  • Carry out research to make sure the business case for diversity was crystal clear
     

She emphasised that the industry and employers must ensure that women were part of the candidate pool and that they must “recruit beyond traditional backgrounds.”

The other important factor, Ms Brilliant added, was that women advocate for themselves differently from men. They were less likely to ask for a raise or promotion. As leaders we should take this into consideration when seeking to create a collaborative environment where women can advance in their careers at the same pace as men do, she said.

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