With staggering growth predictions tossed about and compulsory superannuation driving huge inflows, the promise of riches in the Australian funds management sector is set to entice even more young accountants away from public practice. 
 
Story Melissa Wilkinson 
 
The heady world of funds management is likely to steal an even greater share of the financial services limelight over the next 15 years. Australia’s funds management sector now has $1.1 trillion in assets under management and is currently ranked fourth largest in the world, behind the United States, France and Luxembourg. 
 
According to Axiss Australia, Australian investment fund assets have more than tripled since 1996, with a compound annual growth rate (CAGR) of nearly 12 per cent. 
 
A survey of the world’s 500 largest fund managers by investment consulting firm Watson Wyatt, (2007 Global Pension Assets Study), found that at nearly 15 per cent, Australia had the highest CAGR between 1996 and 2006 of the 11 countries surveyed. Superannuation funds dominate the Australian funds management industry, and when combined with life insurance funds, the total market share of superannuation assets represent more than 70 per cent of total Australian investment funds. 
 
The Reserve Bank of Australia predicts that the assets of Australia’s superannuation industry are expected to balloon to $2.4 trillion by 2015, with a growth of 13.5 per cent per annum over the next decade. 
 
Growth Drives 
Ten years of strong economic growth, the introduction of a compulsory 9 per cent superannuation scheme and the favourable tax treatment of super have been responsible for driving growth in the sector. Buoyant financial markets, the privatisation of government-owned assets and more sophisticated and educated investors have also been key. 
 
Michael Rice, director of Rice Warner Actuaries, a firm that works primarily in superannuation, believes that Australia’s ageing population is a critical influence. “We’re going to see much higher contribution flows over the next 10 years. As Australian baby boomers near retirement, they’ll put more and more money into their super. Their mortgages will have been paid off, their kids will have grown up and they’ll have much more disposable income to invest as voluntary contributions.” 
 
How Does Australia Size Up?  
The sheer weight of money flowing into Australia’s funds management sector will continue to see it hold its own on the global stage. 
 
Of the top 500 firms surveyed in Watson Wyatt’s global study, the total assets under management were valued at about $US63.7 trillion. Out of the top 20 global asset managers, 11 were from Europe and the remaining nine were from the United States. The European-based investment managers managed 56 per cent of these assets. With assets worth US$2.5 trillion, investment giant UBS is still the largest fund manager in the world. 
 
Other large fund managers in the top five include Barclays Global Investors,State Street Global, AXA Group and Allianz Group. All of these managers have a presence in the Australian market. 
 
There were 16 Australian fund managers who made the cut in the survey. Together they manage about $US581 billion in assets and collectively represent about 1 per cent of the global funds management industry. Colonial First State remains the largest player and is followed by Macquarie Bank Group, AMP and National Australia Bank. Together, these four manage the lion’s share of funds in Australia. See Table 1. 
 
Key Industry Themes 
A PricewaterhouseCoopers Investment Management survey conducted in Australia this year found that retaining key people 34 investment managers surveyed. While producing sustainable alpha will always be a critical issue, firms that are able to attract and retain the best and the brightest investment talent in the future will be in the box seat when attracting institutional funds. 
 
The survey also found that increasing competition is leading to greater innovation in the sector and a move into alternative markets. On the downside, it’s also leading to greater pressure on margins which is likely to result in further industry consolidation. The chief executive officers surveyed predict that corporate activity around the smaller investment managers and platform businesses is on the cards. 
 
Opportunities Abroad 
The PwC survey also found that the Australian industry is increasingly recognizing the potential export opportunities. Although it’s traditionally had quite a low export orientation, more organisations are starting to look at the opportunities emerging. Already regarded as an investment safe haven by investors, Australia is well positioned to take advantage of the significant growth forecast in the Asia- Pacific region. 
 
The Investment and Financial Services Association (IFSA), the industry body which represents the Australian retail and wholesale funds management, superannuation and life insurance industries, is working hard to push the export opportunities for the Australian funds management sector. 
 
IFSA’s chief executive officer, Richard Gilbert, says that in five years’ time, IFSA’s vision is for Australia to be the pre-eminent financial services sector in this time zone. “While there are incredible opportunities to grow the sector, there are still three or four tax measures in Australia which need to be loosened or reformed. Treasury has started to look at the withholding tax system which is good news. I think if we can get it right, we’ll have a faster growth rate than either Ireland or Luxembourg.” 
 
The Promise Of Riches 
There is no doubt that the job opportunities for Chartered Accountants in the funds management sector are huge. Chartered Accounting is one of the few professions where there is a good crossover with funds management. Both require people with a love of numbers and an interest in companies and how they tick. Plus, with no end of the skills shortage is sight, the demand for sharp, switched-on people with an analytical bent can only grow. 
 
Typical entry points for Chartered Accountants transferring across from the professional services environment include associate equity analyst roles in a broking firm, fund accountant roles or assistant product manager roles in a funds management firm. 
 
According to executive search firm Jon Michel, there is a huge demand for junior analysts across all asset classes, particularly in private equity. As the sector covers a wide spectrum, all aspects of the industry should be canvassed for opportunities, particularly in hot areas like property and infrastructure. James Godfrey, managing director of boutique wealth management recruitment firm Godfrey Group, believes that the level of commercial acumen typical in Chartered Accountants is highly valued. 
 
“Candidates with strong analytical skills and also the ability to communicate to people with all different styles and personalities are in demand. It’s still a tight market to get into, so candidates need to do a significant amount of research so they’re completely prepared when they speak to the right person.” 
 
A number of recruitment firms and fund managers agree that the traditional overseas tour of duty is no longer a compulsory part of the funds management career path. Overseas experience is most valued in less mature areas like alternative investments, structured products or emerging markets. 
 
Andrew Aitken, a Chartered Accountant with 15 years’ experience in the funds management industry, currently oversees client services and communications for funds management firm Ausbil. He got his break into the industry as an in-house accountant at BT and believes that overseas experience is helpful, but not necessary. “In areas where you can’t get the training and experience domestically, then definitely offshore experience is an advantage. A meaty job in areas like credit derivatives in New York or London is very well regarded. More than half of our team at Ausbil have worked offshore. In terms of an optimum career path, experience in both a Chartered Accounting firm and in an investment bank is ideal,” he says. 
 
Angus Gluskie, managing director of boutique fund manager, White Funds Management and a Chartered Accountant, is a big fan of accountants as new recruits. “We’re explicitly looking for Chartered Accountants who are keen to cross over. We like the skills set because it’s financially based, and there is already a strong understanding of reporting procedures and standards. We can take people and quickly give them the professional training that’s required. We plan to hire one to two Chartered Accountants per year over the next four or five years.” 
 
No Pain, No Gain 
While there is always demand for good people, Chartered Accountants should not expect to just walk into the job of their choice. Strong qualifications from an accounting or economics background are essential and additional training in specialist investment market courses is required. Potential candidates must be prepared to do at least three more years of rigorous study. Many people start with the Graduate Diploma in Applied Finance and Investment and then do either the Chartered Financial Analyst (CFA) program or a Master of Applied Finance and Investment. The top pick for employers in the sector is the CFA program. It’s the highest qualification in the investment industry, but it’s also the toughest - by a long mile. 
 
Even the mention of signing up to the CFA program is enough to send a shudder through those familiar with it. Candidates have to pass three six-hour exams across three years, (Level I, Level II and Level III), which involves a minimum of 250 hours of study. The failure rate is huge. 
 
According to the CFA Institute, the Level I global pass rate in 2006 was 40 per cent, the Level II global pass rate was 48 per cent, and Level III, 76 per cent. In addition to the demanding study schedule, the CFA program also requires four years of relevant work experience in the investment industry. 
 
A Slice Of The Action 
For those successful at making the transition, they can expect to see innovative and competitive remuneration packages on offer. The funds management sector has been hit in the last few years with star managers breaking away from large institutions to set up their own funds. Many fund managers like billionaire Kerr Neilson, who floated Platinum Asset Management, have been tempted to either set up their own firm or join a smaller boutique firm. 
 
As a result, a slice of the action by way of equity is being offered to high performers. This is in addition to a sizeable base package and bonuses. With strong market conditions over the last 18 months, salary, bonuses and the length and size of lock-in packages have been increased. The bonus guarantee has also been reintroduced. Lee Humphrey, principal of the investment management practice at recruitment firm Derwent Executive, says that a higher fixed proportion in the overall remuneration package is currently very popular. 
 
“There are also higher short-term incentives and analysts can earn up to 30 to 100 per cent of their base salary in bonuses. Key people are being locked in with long-term incentives in order to remove the key person risk. We’re seeing some people committing to five years or more. It does pay to stay in this industry.” 
 
A Word Of Warning  
For those Chartered Accountants already eyeing off the sector with dollar signs in their eyes, a word of warning. 
 
To be successful in the funds management game, candidates must have high levels of passion, conviction and drive. Gluskie says that if you’re just considering transitioning across because you’re sick of accounting and like the idea of more money for fewer hours, stop. 
 
“You can’t be half-hearted or just testing the waters in this business. The intellectual challenge is much harder in this industry and mistakes won’t be tolerated. People either need to be very good or they won’t last.” Candidates also can’t afford to be too shy as the roles often require people who are prepared to question the norm and easily share their views. Chartered Accountants who are entrepreneurial, selfmotivated and who can deal with the less rigid structure will do well. 
 
The more flexible, embryonic nature structure seen in the boutique funds is another important career consideration. The management structure is typically flatter which means that there is less room to move up the ladder. There are also less structured professional development programs in place than those in the Big 4 or second tier accounting practices. Learning is predominantly on the job and under the supervision of a more experienced colleague. 
 
While the demand for smart cookies is certainly there, getting into the funds management sector is still hard. Chartered Accountants who are currently a reasonable sized cog in their accounting practice wheel will need to be prepared to eat some humble pie if they want to transition successfully. A sideways or backward step is likely to involve a less pay and prestige. 
 
Plus, new entrants to the sector need to be prepared to stay put once they’ve arrived. The likelihood of having to wear a golden handcuff is n increasing possibility as organisations strive to keep top talent. 
 
While this may have initial short-term amifications for the ego, the long-term upside s huge, both professionally and personally.