June 23, 2013 10:35 pm

Financial Training: The drive to spread expertise

illustration by Øivind Hovland for Financial Training June 2013©Øivind Hovland

Ever since the crisis of 2008, and the realisation that many of those implicated in the meltdown were ignorant of the risks they were taking, financial training has been high on the agenda for banking professionals.

Now, in a bid to restore public confidence in banks and banking, business schools and training companies are introducing programmes with a broader appeal, for those who do not know their ETFs from their EDRs.

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Both academics and training companies agree that consumer mistrust is endemic. “The average person thinks the system is rigged, that the industry is corrupt,” says John Bowman, managing director for the CFA Institute, which has developed the flagship CFA (Chartered Financial Analyst) programme for the investment industry.

SP Kothari, deputy dean at the MIT Sloan School of Management in Massachusetts, agrees. “Whenever they [consumers] are dealing with banks they are dealing with an informed party that [they believe] is not working for them but is working against them.”

Business schools are setting up research centres to look at the business and policy problems surrounding the finance industry. Sloan is halfway towards raising the $10m it needs to establish the MIT Sloan Center for Finance and Policy. In London, Imperial College business school raised £20.1m in March this year from hedge fund billionaire Alan Howard to develop a research and teaching centre in finance.

The development of Moocs – massive open online courses – is helping to promote financial literacy. At Carnegie Mellon University in Pennsylvania, for example, two professors, Raj Chakrabarti and Anisha Ghosh, launched the Academic Financial Trading Platform this month, with initial courses covering macroeconomics, investment analysis, and options, futures and other derivatives.

Prof Chakrabarti believes that the financial crisis made many people distrust the black box investment solutions provided by professionals. “It was our vision from the beginning that if these [black box technologies] could be made more transparent, it would restore confidence,” he says. “It really turned out that this Mooc movement was an ideal way to prepare people to take control of their own business decisions.”

Some organisations such as the CFA Institute, which sets the standards for investment professionals, has planted a foot in both camps, with qualifications for finance professionals and for those in other professions – such as law or IT – who work for financial companies.

In investment, the CFA’s influence on fund managers continues to increase, says Steven Ferraro at Pepperdine University in California. The CFA qualification “is becoming much what the CPA [Certified Public Accountant] is for accountants”. He believes that in some cases the CFA qualification trumps the MBA.

“What I’ve noticed is that employers are pushing for people with more specific skills than an MBA,” he says.

In May the CFA Institute broadened its appeal with the launch of the Claritas Investment Certificate, a training programme for those “who need a broad understanding in a broad workforce”, according to Mr Bowman.

The launch results from a longstanding dialogue with the finance industry, he says. “There was a growing divide between the front office and the other 90 per cent [of financial companies]. They often didn’t understand how they fit into the larger environment.”

Some 3,400 candidates in 70 companies took part in the trials for Claritas, including Abraham Harris, an analyst in global talent management at BlackRock. Mr Harris was one of 44 BlackRock staff on the trial, and says the programme helped build foundation knowledge among the back office employees. “One of the key things is that they were able to understand better internal communications,” he says.

As the programme unfolds, Mr Bowman thinks Claritas could become the CFA’s biggest money-spinner. “If our maths are right, we think it will be significantly larger [than the CFA].”

Meanwhile, as the economic doldrums continue, more and more young professionals are studying for financial qualifications to give themselves an edge in the job market.

At financial training company Training the Street, Zane Hurst says the courses traditionally used by the top banks to train recruits are increasingly in demand at business school, even for students in their early twenties who are looking for their first job.

Some are taking the courses even before their first bank interviews. “Increasingly what has been taught at a corporate level is being taught at an academic level,” says Mr Hurst.

In California, Prof Ferraro points out that undergraduate students are tackling CFA qualifications these days. “It’s becoming pretty obvious it is a competitive advantage.”

The number of business school masters in finance degrees is growing in response to demand, particularly in programmes for pre-experience students, where no previous work in the financial sector is required.

At MIT Sloan, the MFin programme is the university’s most popular course, says Prof Kothari, with 1,700 applicants for just 120 places. More than half the students accepted on the course have a perfect score of 800 on the GMAT, the entry test for business school.

While many business schools in the US have launched masters degrees in accounting to deal with changes in regulations, in Canada, masters in finance courses are proliferating as Canadian business schools adopt the European model of masters degrees.

The Schulich School at York University in Toronto has launched a one-year degree, with specialisations in capital markets, financial risk management and regulatory affairs for financial institutions. The latter is particularly important in developing economies, says Schulich dean Dezsö Horváth. “Compliance officers in banks are in need of this kind of training too, not just regulators.”

At the neighbouring University of Toronto, the Rotman School of Management runs a 20-month post-experience MFin degree. Rotman is increasingly building personal skills development into the curriculum. “It’s about giving the people the confidence to do the job,” says Elizabeth Duffy-Maclean, managing director for the master of finance programme.

It is a similar story at London Business School, which tops the FT ranking for post-experience masters degrees in finance. Wendy Alexander, associate dean for degree programmes, says the school’s degree is still an attractive option for those in finance, in spite of the financial crisis. However, the students are changing their areas of study on two counts.

Instead of graduates all heading for the investment banks, they are looking at a range of activities. LBS is piloting three areas of study to address this: investment analysis, corporate finance and risk management.

A geographic shift in applicants has occurred, with more coming from Asia. “It reflects the flow of power and capital in the financial world,” says Ms Alexander. She points out that this indicates a growing interest from sovereign wealth funds and central banks.

Her observations are borne out by data collected from the business schools that have participated in this year’s FT Masters in Finance ranking. Almost half (47 per cent) of students at the 39 non-Chinese business schools participating in the 2013 ranking are from Asia, with 33 per cent of the total from China.

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