By George Theocharides
Cyprus International Institute of Management
Despite the current financial crisis and recession that we are experiencing, one industry that stands out, is resilient and is growing is Financial Services. Despite the reputational damage that we suffered following the events of March 2013, many of the benefits that made Cyprus an attractive investment destination are still there and not lost.
What are these benefits? The strategic location, the fact that we are an EU-member state and thus fully aligned with the EU legislative framework as regards financial supervision, highly-skilled and educated workforce providing financial and professional services, as well as a “benevolent” tax system (despite the recent enforced increase, still the lowest corporate tax rate in the EU at 12.5%, zero capital gains tax, and no withholding tax on dividends and interest distributed, as well as double tax treaties with around 50 countries).
An exciting and promising area within the financial services spectrum is the funds industry. Significant progress to develop and promote the sector has been made on this front in recent years from the various parties involved (the regulators and the government authorities, as well as the private sector). However, more needs to be done and one important area we should improve that could provide us with a competitive advantage is to make sure industry participants and service providers have the necessary skill set in order to make Cyprus a strong funds jurisdiction. If we want to administer but also manage these funds that could register with our Securities and Exchange Commission (CySEC), general but also specialised knowledge is paramount for industry participants.
To my mind, they should have a clear understanding of the principles of finance – the concept of the time value of money, risk and return, the structure of the global fund industry and industry participants, the various asset classes, the way risk is measured and managed, and the valuation of different types of securities, among others.
Another area that they should study relates to the concept of ethics in financial services. This has been increasingly important these days across the world, given the recent financial crises that we have experienced. They should also command basic knowledge of economics (at the micro and macro level), the understanding and use of statistical techniques (that includes the ability to use computer programmes to analyse data), as well as the main accounting principles (reading financial statements, and constructing the relevant financial ratios).
Beyond these basic concepts, they should possess more specialised knowledge. One area is the field of portfolio/ asset/ wealth management. They should understand how a portfolio of various asset classes and securities is constructed, and how its performance is measured. Another area relates to the administration and structuring of a fund, as well as issues related to compliance requirements, anti-money laundering regulations, financial reporting, taxation and legal procedures.
In terms of qualifications, market participants should obtain the relevant licenses from the Cyprus Securities and Exchange Commission – CySEC (currently there are two exams offered – the basic and the advanced). These licenses are for individuals engaged in the reception, transmission, and execution of client orders, but also for those who deal on a proprietary basis, manage portfolios, offer investment advice, underwrite financial instruments, and perform the activities of collective portfolio management and risk management for collective investment schemes (either UCITS or AIFs).
Academic qualifications are important, such as relevant Undergraduate and Postgraduate degrees. At CIIM, we recently introduced a Masters degree in Financial Services that aims to address the specific needs of the industry and provide candidates with the skill set necessary to succeed in their careers.
Apart from academic degrees, it’s also important to have professional qualifications. The certificates offered by the Chartered Institute of Securities and Investments (CISI) are such appropriate qualifications. CISI is the largest and most widely respected professional body for those who work in the securities and investment industry in the UK, but also in a growing number of financial centres around the world. They offer specialised certificates in numerous fields in finance (wealth/investment management, collective investment scheme administration, risk management, among others).
Another excellent professional qualification is the Chartered Financial Analyst (CFA) credential, probably the most respected and recognised investment designation in the world. To become a CFA Charterholder, candidates need to complete the three levels of the programme (exams) plus they will need to have four years of qualified investment work experience. The CFA Society of Cyprus, although still small, is growing fast in numbers and I believe is another professional body that can play a vital role in promoting the fund industry in Cyprus.
The Executive Education Department of CIIM offers preparatory seminars for a number of CISI certificates (Risk in Financial Services, Global Securities, Wealth and Investment Management), the CFA Levels I and II, a specialised course on Fund Management, as well as an Advanced Certificate in Fund Administration (awarded in association with the University of Manchester Business School and CLT International).
George Theocharides is Associate Professor of Finance and Director of MSc in Financial Services at the Cyprus International Institute of Management (CIIM) www.ciim.ac.cy