This post by Paul McCaffrey was originally published on CFA Institute's Enterprising Investor.
From the vantage point of The City or Wall Street, this may not seem like the likeliest scenario. But it is worth considering — and preparing for. Indeed, among the many compelling takeaways from the recent Investment Professional of the Future report from the Future of Finance at CFA Institute was this intriguing quote:
“India — because of the increasing demand for financial services, its strong economic growth, and its number of capable engineers — could become the world’s investment hub.”
The breakneck pace of India’s economic expansion and development is hardly a well-kept secret. Neither is its increasingly prosperous and connected middle class. Nor are the headwinds that the capitals of world finance in North America, the United Kingdom, or Western Europe are confronting.
Data from Investment Professional of the Future highlights these challenges and opportunities. Culled from industry roundtables and a global survey of nearly 4,000 CFA Institute members and candidates, among other sources, this data provides a compelling picture of the future investment landscape and some of the features that may come to dominate it.
The total census of core investment professionals is expected to grow to 1.2 million 10 years from now, up from 1.05 million at the end of 2018, according to a Mercer market-sizing study commissioned by CFA Institute. That increase constitutes a compound annual growth rate (CAGR) of 1.5%. But where will that growth occur? A CAGR of 0.9% is anticipated in the United States, 1% in the United Kingdom, 2.3% in China, and 2.9% in India.
That means that 10 years from now, there will be 9% more finance pros in the United States and 10% more in the United Kingdom than there are today. Compare those figures with those of China and India — 26% and 33%, respectively — and there is a clear conclusion:
The Axis of Global Finance Is Shifting East.
But drill deeper into the analysis in Investment Professional of the Future and it’s easy to become even more bullish on India’s future as the world’s potential finance hub. There’s a case to be made that the trends anticipated over the next 10 years may accelerate thereafter.
The report notes how technology is transforming the investment sector and that machine learning, artificial intelligence (AI) methods, and alternative data for portfolio construction, in particular, are seen as being especially material in shaping how this transformation plays out. India could be uniquely poised to benefit from this. “India’s education system — most notably, the Indian Institutes of Technology (IIT), with campuses across the country — has produced a steady stream of capable engineers,” the report states. And international investment firms are hiring them up. Indian operations also already account for between 10% and 20% of the workforce at these international firms, according to participants in the Investment Professional of the Future roundtables.
Skills Deficit or Prerequisite?
To be sure, India’s ascent to the preeminent center of global finance is by no means assured. And the report hints at a potential mismatch between the skills Indians are developing and those the industry requires. That is, the report suggests, Indians may be overweighting tech and possibly creating a soft-skills deficit.
Investment Professional of the Future asked industry leaders what skills they anticipate will be most important for successful finance careers in the next 5 to 10 years. And technical skills came in fourth (14%) out of four, behind soft skills (16%), leadership skills (21%), and the most sought after — so-called T-shaped skills (49%), which include situational fluency/adaptability and the ability to connect across disciplines.
Yet for those taking the long view, this caveat may actually strengthen the case for India’s potential to dominate finance in the years ahead. The “Roadmap for Investment Professionals” section of the report identified tech skills as most critical in the early stages of finance careers. So these abilities may be the key to gaining entry to the sector, while T-shaped skills help ensure career advancement and longevity. Individuals who fuse tech savvy with flexibility, who continually invest in new skills, and who are capable of reinventing themselves will rise to the top of the industry. And it is a safe bet that among India’s “number of capable engineers” are many of the chief architects of the finance sector’s future. They already have a head start.
Which is all just to say, India’s strengths greatly outweigh its deficits, and with its vast, increasingly educated, and increasingly prosperous population, it is poised to grow its role in global investing in the decades to come. And young and aspiring finance professionals may want to pay attention.
The future of the investment profession may be centered not in New York and London, but rather Mumbai, Delhi, and Bangalore.
