Purpose beats self-interest, finds study

By Tim Stewart
 — 1 minute read

Investment professionals who are driven by a sense of purpose are more likely to help clients reach their financial goals, according to new research.

A new joint study by State Street's Center for Applied Research and the CFA Institute has pointed to the superiority of a 'purpose-driven' culture in the investment industry.

The research, titled Discovering Phi: Motivation as the Hidden Variable of Performance, identifies 'phi' – a factor that encompasses purpose, habit and incentives.


'Phi' has a positive effect on organisational performance, client satisfaction and employee engagement, the research found.

"The research has found that phi has a statistically significant and positive link to broad performance measures, including client satisfaction and employee engagement, that can sustain the industry and drive client satisfaction for decades to come," said the report.

"A one point increase in phi is associated with 28 percent greater odds of excellent organisational performance, 55 percent greater odds of excellent client satisfaction and 57 percent greater odds of excellent employee engagement."

Investment managers in the Asia-Pacific region have the second-highest levels of phi globally, following the Americas, found the research.

Within the Asia-Pacific region, asset managers are leading the way in phi, followed by asset owners and insurance firms.

"Building a culture and environment with aligned purpose, habits and incentives can give organisations a competitive advantage that is sustainable and will benefit clients, the providers themselves and ultimately society as a whole," said State Street global head of CAR Suzanne Duncan.

"When investment professionals are asked to deliver against inappropriate metrics on an inappropriate time horizon, their passion for markets eventually becomes divorced from their true purpose – achieving the long-term goals of the investors they serve.

"Investment performance today isn’t only about alpha; it must focus on phi: a purpose-driven motivation that represents the greatest potential for performance, across market cycles."

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Purpose beats self-interest, finds study
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