Yahoo Finance’s Brian Sozzi and Julie Hyman speak with CFA Institute President & CEO Margaret Franklin about CFA’s employee cuts and exam delays, and the Institute’s Global ESG Certificate program offering

Video Transcript

BRIAN SOZZI: Trading and investment banking revenues on Wall Street have been doing quite well throughout the pandemic. Taking grueling CFA exam to reach the next career level may be in the cards for some folks on Wall Street. Margaret Franklin is President and CEO of CFA Institute, and she joins us now. Margaret, good to see you again here. So how has the pandemic been-- or how has it impacted the growth rate in those signing up to take the test?

MARGARET FRANKLIN: Right. Well, first of all, Brian, nice to see you again. It's been about a year when we were just in the-- at the point of having to cancel our exams. And a year later, we've had kind of an extraordinary trajectory. It's been a challenging year. But just last month, we launched our very first computer-based testing, and that is the way forward for us.

So the May exams, which are coming up soon, will be one of our largest exams. And so we are back on track, which is, obviously, very welcome for those candidates who have been studying incredibly hard. And as you say, it's a-- it's an anxiety-inducing time, so we're really pleased to have state-of-the-art testing facilities to be able to provide greater accessibility for people and to actually be administering the exams.

BRIAN SOZZI: I remember very much anxiety. I was studying for that for a brief period, and it was not fun. But how has the-- how has the test changed over the past year? The world has changed. The world of finance has changed. How has the test itself changed just in terms of the questions?

MARGARET FRANKLIN: So in actual fact, the CFA charter program is a foundational program, so you won't see just in response to this year a dramatic change or a change in the curriculum. It's foundational. It has changed, though, over the last number of years to address emerging themes that are important for investment professionals as they're entering their career and important for employers. And those include things like a greater emphasis on alternatives and private investment, obviously ESG, where about 15%, 16% of the curriculum is integrated with ESG, private wealth, the things that are important in material shifts in the industry that employers would be looking for an early market entrant to have a good-- good foundational understanding of.

JULIE HYMAN: Margaret, it's Julie here. I want to ask about some of the changes that you've made at the organization as you're trying to adapt to all of these changes that you're talking about. I know that you laid off, reportedly, about 120 folks. And the remaining employees had some questions or were sort of dissatisfied about what was behind that and the direction that you guys are going in. Can you talk to us about-- about what's happening at the Institute?

MARGARET FRANKLIN: Yeah, so prior to COVID, it was clear that we probably needed to update our strategy, and it really focused on two things-- modernizing the CFA credentials, so that's how we administer the exam, as I just mentioned, computer-based testing, making sure that the curriculum and content is really ready for the modern world. And then finally, how people are learning is-- and what we know about that has changed dramatically over the last number of years. So really, modernizing the CFA program in-- in all of its components was critically important.

But the CFA charter program is at that generally early stage of an investment professional's career. And we also wanted to deeply expand our professional learning to provide the platform and learning suite of strategies for an investment professional throughout their entire career. And so when we put our markers down on those particular-- on those particular initiatives, we realized that we needed different skills than we had necessarily in-- in CFA Institute. And so that required a restructuring.

That being said, I have to say I am incredibly proud that our board allowed and approved for us to recognize that we were in a global pandemic. So those that were impacted by the restructuring actually have-- are on, essentially, garden leave until August 1 of this year, and that's when their severance kicks in. So we were able to carry everybody throughout almost the entire pandemic. And for that, I'm deeply grateful to our board to be able to do that consistent with our mission.

BRIAN SOZZI: Is-- Margaret, is the restructuring, is it over? Are you through with it?

MARGARET FRANKLIN: Yeah, we did a major restructuring back in September, and we are through it, although, you know, we have new skills that we'll need to bring in. And so we're in the process, actually, of hiring and bringing in-- and bringing in those new skills as we build out our capabilities for professional learning, for our research advocacy and standards work, as well as sort of the infrastructure, IT being most notable to enable those activities.

BRIAN SOZZI: You recently launched, what, I believe a certificate for ESG. Talk to us about that.

MARGARET FRANKLIN: So this is a really exciting initiative. It is an ESG certificate for investment professionals. It was developed in the UK by our UK society, and we've taken it and globalized it. We launched it last week in key financial markets. And it really addresses a need of a demand and supply gap.

We actually undertook a study looking at a million LinkedIn profiles that are applicable for us, and really, less than 1% of those profiles listed ESG skills. We simultaneously looked at 10,000 job postings and about 20% of those-- and we know that that's increasing-- are requiring ESG skills. And so this certificate addresses the needs for knowledge, skills, and ability, and, of course, consistent with what we do certifies the mastery of that. So it's about a 2 and 1/2 hour exam. It takes about 130 hours of study. And we're really proud to-- to be offering this around the world.

JULIE HYMAN: Margaret, what are ESG skills? Because I think one of the things that has sort of bedeviled the ESG industry is that there's little standardization. In some cases, there's not much transparency. So-- so how do you-- how do you test for it?

MARGARET FRANKLIN: So let me make just an introductory comment to that, because you're absolutely right, there's a plethora and cacophony of standards out there. We are also in the process of finalizing our standards for investment funds, allowing investment managers to disclose the nature and characteristics of their funds, and then for investors to be able to evaluate them. And I think that standards process, the technical working group, the consult that we've done on it belies the fact that there are skills that are required and commitments to actually be able to declare funds and understand the nature of ESG investing.

And those are things like, how do you integrate or how do you select which factors are important for your portfolio process? What is the research techniques that you will use to evaluate securities or asset classes? And then from a product development perspective, what are the key requirements that are needed? So there's a series of factors.

First of all, understanding the ESG landscape, understanding the factors that are important, understanding from an integrated fund to an impact fund, what are those different characteristics? And then how do you go about building portfolios or products that meet those needs? In the case of our ESG standards, it's really about providing some precision transparency and measurements to those funds such that investors understand what they're investing in and investment managers are clear about the disclosures of those funds.

BRIAN SOZZI: Margaret, before we let you go, we have a lot of CFA test takers that watch "Yahoo Finance Live" each day. Do you want to hand out any clues, any test clues?

MARGARET FRANKLIN: Practice, practice, practice. Bring your A game. And I wish all of you the very best of luck. I remember mine like it was just yesterday. And my best wishes to all of you as you write your upcoming exams.

BRIAN SOZZI: Fair enough. Margaret Franklin, CEO of CFA Institute, always good to speak with you. Stay safe. We'll talk to you soon.

MARGARET FRANKLIN: Thanks, Brian.