CIIA to Deepen the Investment Market through Innovation and Standards - Akin' Adeniyi


Monday, November 09, 2020 / 08:00AM / Akin' Adeniyi, CIIA / Header Image Credit: Ecographics


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Recently, the Association of Corporate and Individual Investment Advisers (CIIA) elected Mr. Akin' Adeniyi, CIPM  as the President & Chairman of Council of the Association, while a new website was launched to provide more information about the operations and outlook for the association's objectives toward market development. In a recent interview with Ottoabasi Abasiekong, Anchor, Market Review on WebTV; Mr. Adeniyi speaks further about these recent developments and what investors should expect from the association.



Q. Congratulations on your recent election and I like to start from your inauguration address on the newly unveiled website. Can you provide more insight into how CIIA intends to make investment advisory better than what obtains currently?


A. Thank you for that. It is actually an issue that has remained top-of-mind for most industry professionals in the country for quite a while. The fact is that we've always had the practice with us as a recognized capital market function albeit a little misrepresented and therefore not fully effective for obvious reasons. What you find hitherto was market practitioners actually getting registered by the SEC as corporate or individual investment advisers, but perhaps for reasons having to do with inappropriate context and/or poor reception by investors, the service, a vital need in the investment process just wouldn't fly as it should, and it more or less unfortunately became obscure in the value chain of the investment process.


So over the years at CIIA, precisely from the last global financial meltdown of 2008/2009, we've researched this and believe no other time is better than now especially in the covid-19 era, to concretize the plan in making the desired changes for desired results, working closely with the SEC. So about 30 months ago the SEC saw good purpose in our proposition and efforts, and granted approval for the birth of CIIA with the objective of right-placing the function for good value in the protection of investor interest as primary obligation. We're committed to doing just that, and even more as you're about to find out, for the greater good.



Q. It is noteworthy that as a Trade Group of diverse professionals in the investment industry, CIIA adopted a style that appears to be rather simple in operations. Would you like to throw more light on specific areas of the changes to expect in the market and by the general public?


A. Alright. You see, that is apparently because we're just starting out the way it should be, but you can be sure to expect more dynamism as time goes by. The investment advisory service requires a highly specialized skill set in financial and investment stewardship to investors, one which any market cannot afford paying little or no attention to. Most fortunately for us in Nigeria we have this particular skill set and I can say in abundance, but not quite well represented in terms of capabilities, relevance to market development, and obligationary effectiveness most importantly. What you however find filling the gap of underrepresentation is what for want of better nomenclature right now I call unscrupulous financial advisers. Large in number and unregulated, this lot continues to give the market the headache from fraudulent practices and a bad image that must be cleaned up as urgently as possible. And this is why our primary objective at CIIA is investor protection inside out by utmost professionalism.


So in direct response to your question, that change will be experienced in the appropriate coordination of the right foot soldiers to deepen the market in the areas of Financial Planning, Investment Products innovation and Stewardship Accountability Standards. We want to separate the wheat from the chaff. But it doesn't just end there, we equally expect to see specialization by and amongst our money/investment managers in their proprietary accounts spread and by extension, that also affords us the opportunity to begin showcasing our star portfolio managers in Nigeria. I believe the greatest advantage of this would be in the area of creating that much needed critical sales and relationship management force going deeper into the markets to mobilize the savings needed for investments.



Q. Can you speak to the importance of the members' directory on the website and how CIIA also intends to improve on investment performance reporting as one of her outlooks for market development? Does this suggest we don't have it good enough already?


A. Those two are actually connected in a way or more. First, it is important that we are able to keep track of our members' progress in a number of ways and one of such is to ensure members of the investing public have access to authentic information on investment advisers. Closely connected to that is the need for investors to be able to have a good idea of the records of performance of the products our members are recommending. You will agree with me if there's any one item atop the list of the sins we criticize our public administrations for, it must be lack of transparency and accountability. But we shouldn't also be caught doing the same in the private sector especially in a service of fiduciary responsibilities. So we're developing a framework by which access to robust information will be seamless and our belief is that things can always be done better especially in situations that demand consistency with global trends. So personally, I should also know better as a specialist in that area that our market really needs to raise the bar here, more so for reasons that healthy client management and investor relations rest largely on timely and appropriate feedbacks


There can be no investment programme without the feedback mechanism and that is the job of performance reporting, that, being apart from its importance as a critical risk management tool. The popular notion that past performances do not guarantee future ones is not a justification by any means, for performance reporting to be inadequate or outrightly neglected. Interestingly we would also be working with the SEC on this project because it is a major factor for consideration in the mobilization of savings for investments.


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Q. How does the advisory practice fit into the process of Nigeria attaining the SDGs? This is also one of the key points I noted you raised in your address.


A. Now that is a fundamental question. Let me therefore also address it from a fundamental perspective. What is the whole essence of the 17 SDGs beyond sustainable human welfare? Don't forget they somehow used to be the MDGs whose attainment targets were to a larger extent uneven across the globe as at target date of 2015, hence the need to have another fifteen years from then to achieve. So what was our own experience with them as a country? As we're here exchanging thoughts on investment advisory, what specific or concrete programmes do you think Nigeria has in place toward achieving the SDGs in just less than ten years? Recently I read a news item about the president's SA on SDGs still calling for collaboration between government agencies to ensure that we achieve success. But whilst I would not want to digress so much into the controversy around the rate of success recorded so far, I'll just ask you to take SDGs 1, 3, 4, 9, and 16 to do you your own candid assessment in the Nigerian context.


So what is the role of investment advisers in the attainment of SDGs? First fundamental point is the fact that each of those goals requires investments, right? Even if not 100% commercial all throughout. Second fundamental is the fact that every investment that is commercial is a commitment of savings from the surplus side of the economy. Third fundamental is that such savings require appropriate guidance into appropriate SDG investments. Fourth fundamental is that Nigeria currently does not seem adequately prepared for such critical programmes in comparison to what is going on around us in the world.


I say this because a little poser I had put out there around June or July this year about our pooled funds management industry had returned views not in sync with the global drive for ESG Investing despite the amount of talk we're having about it. Mind you I am not saying there aren't efforts, but surely the critical ones are yet missing. So the fifth but not yet the last fundamental is that we need highly skilled investment advisers who understand the terrain of ESG Investing to marshal both public and private sector savings into appropriate products created by specialist managers. For example, I know the NSE is doing well in the area of the G for governance with public market issuers, but who's taking responsibility for the private markets? Again take the E for environmental factors and check who or what public agency is providing us updates on Climate change which is the arrowhead here?


So again I think we have fairly a long way yet to go as a country in this dimension and at CIIA, it is part of the issues we want to address extensively by way of advocacy at the highest possible levels of governance in the country. It is a system of many moving parts we have to carefully craft and keep oiling for the utmost desired results and investment advisers understand this quite well. There are certainly other technical aspects I'd rather leave for another forum to expatiate on, but for now our product managers need to brace up for the challenge we advisers will be bringing to them by way of innovations.



Q. So are you saying in essence that Nigeria is not currently getting any closer to attaining the SDGs?


A. Not exactly, to avoid being quoted out of context. Recall I had alluded earlier on to some report making the rounds about some percentage achievement of the SDGs in Nigeria, but people will have to read that report first and make a judgment on that in conjunction with what the realities are on ground. We have a slightly different take on this at CIIA. Now it is not difficult to tell that we're facing the challenge of critical gaps in our social infrastructure. Education and healthcare especially, that have been most underfunded using the UN set budget standards and we keep seeing such gaps in other sectors.


I give an example, we have about N12 trillion in our national pension fund and just about N1.50trillion in our traditional mutual funds, yet it was the private sector through the CACOVID initiative that rose to the covid-19 challenge for us in the country. Can you not see the essence of private enterprise in the solution to some or almost all of our national challenges already? Investment advisers as capital allocators will be playing a key role in closing such gaps through innovative hedge and impact financing e.g. ring-fencing schemes to channel such funding for sectoral developments.


Advisers as capital allocators will be at the forefront of ESG investing to ensure that the genuine principles and spirit of the concept are not abused or misapplied to investors' detriment. In addition, we need to be very wary and worried about the transition risk of sector investments because very soon most of the familiar FPI inflows participating in our stock market will begin to hold back on the demands of their asset owners. Responsible stewardship is growing very rapidly across the globe now. So certainly, we're faced with the seriousness of having to get very well prepared for such eventualities when they do arrive, because they will. In a nutshell we have to start this charity from home and the sooner the better.



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Q. We're in an age driven by technology and quite a number of measures are being introduced to check its many threats. How secure is your new website in the first instance, and what is your take on SEC's recently issued guidance statement on regulating the fintech and crypto assets spaces in Nigeria? Did that come to you as a surprise?


A. As investment experts with fiduciary responsibility to third party asset owners, we cannot afford launching out on a faulty pad like an insecure website. So I am glad to let you know we went for the very best in that regard and we certainly will continue to upgrade as that particular tool demands. On the issue of SEC's pronouncement on fintech and crypto assets, certainly no surprises at all and it is simply the best call. For quite a while that move has been a subject of the 'to be or not to be' debate across the globe and you'd find what our SEC did is not out of place. We are quite in tune with global trends and as protectors of investor interests, it ordinarily should be part of, or in our purview to promote. So you'd find this already addressed albeit partly in our Codes. But it remains in the front burner of issues for us at CIIA to more comprehensively address. This is about investor risk tolerance, its management, and the much-needed education to provide appropriate guidance to them.


The investing world cannot probably completely do away with technology in general, now that machine learning and big data are even making some aspects of investment management more efficient as has always been desired. So you see it's a double-edged sword, but our commitment is to make it cut more for investors rather than against, in any measure no matter how small. We have to admit that this is the one area that remains almost intractable in the finance and investment industry because it applies fast-paced, in quite an array of functions. From virtual funds aggregation to analytics automation, and of late, transactions and payments systems. But irrespective of application area, investors must remain shielded from the possible downsides. We are however also keenly focused on the great value propositions of fintech to harvest the best gains only in the investors' best interest.



Q. How do you assess our general investment industry in the country and its future given the current economic conditions especially in the wake of covid-19?


A. I believe there are actually many factors to consider alongside covid-19 in addressing this question. It just so happens that it has been a catalyst to the bad time investors generally love to hate and avoid. But for Nigeria I think we're a resilient people in the face of these very tough conditions and my take is that government should strive not to let the crisis especially of covid-19 go to waste. Practitioners too need to up the ante in the area of innovation and more collaboration with government like in the CACOVID example. Quite a number of positives would have been harvested from that experience alone, but the convincingly real macro factor of political risk is a major challenge to normal asset pricing arrangements as we know it, for any further serious commitment to happen.


Perhaps as I have posited in other forums, because even product managers would find it almost impossible to get creative around the dynamic risk factors famous for accessing superior risk premiums in the market. Take for instance again our humongous national pension fund, where the recent monetary policy changes have almost, if not already totally wiped out positive gains to date on an annualized basis for the managers. In a regime of almost 14% inflation rate, yet we are overweight in sovereign debts that don't compare favourably enough in risk premium terms to other alternative investments like infrastructure and specialized private market assets. Admittedly the demographics of the fund play a critical role in its strategic allocations, but that notwithstanding, yet a lot needs to be done in regulatory updates to address this cul-de-sac sort of a challenge. This challenge is not limited to over or under-regulation, current market capacity to fully launch out in the area of sophisticated products is another. For example we cannot possibly access the full benefits of sustainable investing if our derivatives market is not adequately developed at least to support hedge and impact portfolios for accredited investors.


The traditional asset managers are not spared either, but I think that by their own latitudes of operation and control, they fair just a little better in adaptive strategies. But there's still room for improvement for everybody. People who have been at one or two of my trainings and seminars in the past will confirm my consistent agonizing over the embarrassingly wide gap we have between our national pension fund and the traditional public market funds in terms of fund assets. We must close that gap by all legitimate means, especially in enhancement of long-termism.

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Q. So just out of curiosity still, what will be your advice to investors especially retail investors on this issue of low savings rate compared to inflation that is aiming for the roof already? How will CIIA support the drive to grow the participation of retail investors in regulated investment products?


A. You see, our economy is currently going through a bad time, and bad times are just part of human survival in general, they come and go, only that this is a queer bad time going by the market indicators and what we're witnessing here is the serious disconnect between our monetary and fiscal policies. A situation that would make anyone else wonder how we the people manage to keep a good composure. Nigeria is an interesting case study at this moment in issues around inflation and savings rates.


Good thing however is that investors should know there are alternative assets in which inflation-containing performance could be achieved although based on other factors like risk tolerance and time horizon. A lot really depends on the investor's personal and risk profiles which make up a critical foundation in the investment process. If you're talking about savers generally, they will probably have to wait out the bad time, but in the interim could consider money market funds. But they must save notwithstanding, especially if it's short term and target-oriented. Your investment advisers understand all these and will provide appropriate guidance.



Q. Before we round up, this particular question is one I have reserved for your candid opinion because of the controversy it seems to be generating out there. The CISI bill being sponsored by the Chartered Institute of Stockbrokers. What is your take on this development?


A. Interesting. I was hoping sincerely we wouldn't get to that. Well as you're already aware CIIA has issued an official position on that, just like other concerned market stakeholders have equally done. That bill has some history dating back to 2013 I think, and if you now see the reintroduction in 2020, it must send a clear message that the sponsors have an objective which perhaps remains unclear to most people. Fortunately enough, by the decision of council, we have adopted a dialogue approach to get to the bottom of this and I can tell you it's been such a useful discussion with the principal officers of CIS so far.


Mind you though we're not committing to anything, but at the end of it, of course we should be coming to the public with what we believe should be in the utmost common interest of every stakeholder without damage or setback to respective careers and overall market integrity. We stand on fundamental principles and global best practice in the investment industry and nothing less.


Q. At this point, what other information would you like to share with the general public on what to expect from CIIA going forward?


A. Very apt indeed. First and foremost is to seek their cooperation with us in ensuring that they actually deal with registered Investment Advisers in our database. We have developed operations and procedures to make this as seamless as possible. We are also creating an awareness campaign to let people know how to appoint advisers and deal with them in the delivery of their fiduciary services including adviser remuneration. Investors have rights to certain basic information and knowledge that advisers are under obligation to provide by disclosures. We will ensure these are consistently advertised. Investors also have easy access to us in filing complaints or reporting misconducts and we already have procedures well documented to addressing such.


More detailed information about investment products will now be made available for ease of selection in building investor portfolios and we expect by an extension of this, to see more specializations by product along the lines of manager expertise. We would also be working very closely with our financial market and other regulators on policy advocacy to make advisers function optimally in the overall interest of the greater good.


As you must be aware also, one of the frontline objectives of our current 10-year Capital Market Strategy is the widespread propagation of financial literacy and quite a lot is going on in this direction already. We're also in strong alignment with that and have a committee assigned to the objective as well, so the general public will be getting to know more about our own programmes in the same direction very soon. I believe the most exciting aspect for me is the creation of new careers in the investment industry as we begin to welcome professionals who meet our eligibility criteria to practice in Nigeria as Registered Investment Advisers.


Investment Advisory is the strongest link in the value chain of financial intermediation and we practitioners represent that vital channel connecting to the oasis of supplies in the dessert of needs. It is where all the necessary communication goes on for funds mobilization and allocation, and we have this mandate to build ours very solidly. This is the new generation we are passionate about raising, and with the support of my versatile council members and of God, things surely can only get better.


To Read More about the Association, kindly click here


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