Monthly Archives: August 2019

Japan Investment Conference 2019: The Multi-Stage Life and The Challenges Facing Financial Services

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This is an event that I attended a couple of weeks ago and the agenda can be found here:

Click to access JIC2019_agenda_EN.pdf

This was a special event as it was also an opportunity to commemorate CFA Japan’s 20 year anniversary. The topic which was chosen was also interestingly titled “The Multi-Stage Life and The Challenges Facing Financial Services”; this deviated from past topics that the society had chosen and there were a lot of people expressing their opinions that this was more aimed at individuals and wealth advisors rather than your traditional institutional investors. Nevertheless I thought the event was a success.

Out of the speakers, Dr. Andrew Scott from the London Business School was one of the main speakers and his presentation was based on his book “The 100-Year Life – Living and Working in an Age of Longevity”. Other presentations followed this theme regarding our longer life expectancies across countries and the need to prepare for a multi-stage retirement phase.

The ongoing debate regarding this trend up until now has been to consider working and retirement as a two stage process. You pretty much work all your life, put money on the side in terms of savings, state pensions and or private pensions. You reach 60 or 65 or whatever the retirement age is in your country and you tap into your pension pot and your assets during your retirement. Assuming a life expectancy of 85-90 that’s 20-25 years that your retirement pot needs to last. If you are looking at 30 years +, it simply isn’t feasible to to have such a large retirement pot. Governments need to get to grips with this reality. Financial service providers will undoubtably capitalise on this and more importantly, as individuals we need to be aware of this and plan accordingly.

Wealth as a Portfolio of Intangible Assets

This was a very important point that was brought up and changed the way I perceive the accumulation of wealth towards retirement. Up until now, I was only looking at retirement in terms of the cash inflows that you could get from your retirement pot (regardless of whether this is in the form of annuities or income from your portfolio). This could not be further from the truth; firstly, our health is a key asset that needs to be treasured, especially in retirement. A healthier life will also result in a reduction of medical bills. Another point worth noting is the earning ability which shouldn’t automatically go to 0 as we retire. As individuals are likely to lead a multi-stage retirement phase, we might see people in their 60s transitioning in other type of roles. For companies, it’s important to treasure this generation who will be abundant in the workforce. As individuals we need to keep aware of our earning abilities and ensure that our skillsets are still required in the current labour markets.

My Thoughts

Financial Institutions will inevitably need to perform a paradigm shift as we see this demographic change. From an asset allocation perspective, I am interested in seeing how individual portfolios will change to have slightly more aggressive allocations to meet long-term return requirements whilst addressing possible liquidity needs especially in retirement years. This is an area that I am very keen on and that I will be researching in the upcoming months. The solution might be that the level of risk might not be optimal for the individual. In such cases, we should look at longer working years to boost portfolio contributions. Overall I think the start is educating people and spreading awareness of this trend; we all need to be conscious that this is a change that we will see in our generation.

CFA Results Are Coming Out on 6th August 2019.

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So, if you took the June exam, tomorrow is the day that you have been waiting for. Level 1 and Level 2 candidates across the the world will be receiving their CFA scores. Level 3 candidates will have to wait a bit longer. After 9:00 AM E.T. you will get an email from the CFA institute titled “Your CFA Exam Results” . The contents of the email will look like this:

From the first line you can tell straight away if you failed and the email should start with “We regret to inform you….”.

Myths regarding the timing when you receive your email.

The CFA institute says that you will receive your email after 9:00 AM E.T. and some candidates can expect to wait hours before they receive the email. When I was waiting for my exam results, constantly refreshing my inbox and reading forums, people were speculating that candidates who received their emails first had passed and candidates who received their emails later had failed. Over the years I have reached the conclusion that this is utter nonsense and that the order is irrelevant. I have come across both passing and failing candidates who received emails relatively early.

How to interpret the scores?

Unfortunately you will not get told the questions that you got wrong so you will have to look at how strongly you scored in the three bands (<=50%, 51%-70% >70%). Needless to say, if you have many <=50% chances are that you failed. However as I am sure that you are aware, not all topics are weighted equally so if you scored well in highly weighted topics such as equity and financial reporting that might have been enough to offset poor results in other areas. If you failed marginally, the important thing to do now is to identify your weaknesses and to focus on those areas when re-taking the exam, whilst retaining what you learned for other topics.

If you have failed on most topics, don’t despair. In that case, in addition to spending more time in preparing, I strongly advise you to review your study techniques. Exam taking strategies play a key role in the CFA exams so speak with friends who passed and see what worked for them.

I disagree with the marking.

Yes, if you failed marginally and you are confident that you should have passed, you can ask the institute to remark the exam. This will set you back $100 and chances are that things won’t work in your favour, although I have come across a few online posts where candidates were boasting of having had a fail result changed to a pass after asking for their papers to be remarked.

Preparing for the next level.

If you are thrilled that you passed and you want to leverage this positive momentum to get started in your preparation for your next exam, I recommend that you read the following articles where I provide some study tips for levels 1, 2 and 3. I will never get tired of saying this, although all levels share common themes and topics, the type of questions and skill sets required to succeed in each level differ a lot.

I would like to conclude this post by congratulating all candidates regardless of their results. These are not easy exams and only the people who have undergone the preparation and took the exam can understand the effort that it takes in passing. Having had the charter for roughly 3 years now, I am confident that you will reap the rewards of your hard work, so good luck with your journey.