Master Your Card

I read an article today that talked about the possibility of the financial industry outsourcing some of their positions. That got me thinking, is such a thing even possible? I mean I know it’s possible, but what I mean is, would it work? It’s not like the IT department that does everything remotely in most cases anyway. And the finance industry doesn’t manufacture anything. But, the fact is, the CFA test-taking numbers suggest that more and more people outside of the U.S. are fully capable of taking on Wall Street. analyst jobs.

For those of you not familiar with the CFA tests, they’re a three-year self-study course in financial analysis. It covers accounting, corporate finance, statistics, economics, equity and debt securities, derivatives, ethics, portfolio management, and much more. But, the test is really tough. They certainly don’t make it easy and it’s rooted in American accounting practices and given in English. Those who pass the test have the right to add CFA after their name, i.e. Kristy Young, CFA (I’m not, by the way, just giving an example). The acronym CFA stands for “Chartered Financial Analyst”, in case you didn’t know.

As I was saying, the test is really hard. But what’s interesting about this is that over 40% of this year’s 175,000 test-takers (remember we’re only half way through the year) were in Asia. And, according to news reports, job ads in the South China Morning Post actually require a CFA to even be considered. Now, if you’re a kid right out of college going to work for Wall Street with your CFA firmly in hand, your going rate is about $100,000 with a company car, phone, and laptop as your standard package. Depending on the company, you could even get an entertainment budget for those nights when it calls for you to entertain clients. But, we’ve all seen the effects of outsourcing. It costs the company far less overall. There is no need to provide a company car, phone, or laptop and there is certainly no need to provide the entertainment budget. Outside of that, the salary for outsourced jobs is less than what they pay the college kid on Wall Street.

While I’m not suggesting this is something that would happen overnight, if at all, I have to wonder just how feasible an option it might be. Financial analysts will always be in need, but with the economy in it’s current state, the weakening of the U.S. dollar, and the loss of jobs on Wall Street, who isn’t considering options to decrease their expenses right now? These savvy CEOs have probably considered outsourcing some of the analyst jobs to save a buck or two, and by ‘buck or two’ I mean thousands. Still, can people outside of the U.S. really offer the same kind of analysis someone in the thick of things can? The argument that someone outside the situation could probably provide a better understanding of the problem is valid, but somewhere there needs to be a line drawn. I don’t presume that any of us, no matter how well we did on a test, would fully understand the complexities of Asian governments enough to hold jobs offering strategic advisement of their markets. Because of that, I think the same holds true in reverse. There is no way that someone outside of the U.S. can fully understand the complexities of our markets to the extent that they can fully replace someone here. That’s just my opinion though, I’ve been known to be wrong before. However, I think these big companies will need to consider what such outsourcing would do to the economy. Wall Street’s a big place and that many job losses could really throw the market for a loop if they decided to outsource most of those positions.

What do you guys think? Would it bother you that someone managing your assets lived outside of the U.S.? Are any of you CFAs? I’d love to get your opinions on, first do you see such a venture happening, and second, how you would feel about it.

Any of you living outside the U.S. hold a CFA? How effectively do you think you can (or do) manage and analyze U.S. markets?