Research from State Street and CFA Institute Finds Passion and Purpose Drives Superior Long-Term Performance for EMEA Investment Industry

Wednesday, February 15, 2017 9:02 am EST



Public Company Information:

"Discovering Phi: Motivation as the Hidden Variable of Performance"

New research1 by the Center for Applied Research, the independent think-tank of State Street Corporation (NYSE: STT), and CFA Institute, has identified a new and powerful business metric – phi – that can have a substantially positive impact on organisational performance, client satisfaction, and employee engagement at investment firms across the EMEA region.

The report titled, “Discovering Phi: Motivation as the Hidden Variable of Performance” details how phi shows the extent to which purpose, habits and incentives are aligned with the goals and values of the individual, organisation and client. As such, phi has a statistically significant and positive link to broad performance measures that can sustain the industry and drive long-term client satisfaction.

According to the research, a one point increase in phi equates to a 28 percent greater odds of excellent organisational performance2, 55 percent greater odds of excellent client satisfaction and 57 percent greater odds of excellent employee engagement. It also revealed that while the majority (73 percent) of investment professionals in the EMEA region report good or excellent long-term performance and 78 percent cited good to excellent client satisfaction, nine out of 10 also reported some type of demotivation in their current role.

In addition, two fifths (41 percent) of EMEA respondents agreed that acting in their clients’ best interest requires taking on a degree of “career risk,” such as fear of losing your position; while more than half (56 percent) said they experience short-term pressures from the board, management team or consultants. More than a third (34 percent) of respondents believe industry leaders talk to employees about important values and beliefs, and 27 percent believe their leaders spend time teaching and coaching employees.

In response, State Street’s Center for Applied Research and CFA Institute argue that to succeed in an increasingly competitive environment, the investment industry and its professionals in EMEA must move away from a performance-driven culture to one that is purpose-driven to better ensure clients’ long-term goals are met.

Mimmi Kheddache Jendeby, senior research analyst with the State Street Center for Applied Research said, “Investment performance today isn’t only about alpha. With the investment industry facing considerable challenges, we believe that building a culture and environment with aligned purpose, habits and incentives can give organisations a sustainable competitive advantage that will benefit clients and providers.”

Rebecca Fender, CFA, head of the Future of Finance initiative at CFA Institute, added, “The research shows that why you invest actually impacts how well you invest. When there is a lack of client-centric purpose to direct passion for the markets, the alignment of interests and motivations becomes distorted. We believe that by focusing on phi, investment professionals and their firms can improve outcomes for investors and create greater trust in the industry overall.”

Purpose Drives Outcomes

  • According to the research findings, maximising phi among investment management professionals, investment management firms and their clients may be one of the most promising ways of creating value and trust in the industry. The good news for the investment industry is that 57% of EMEA investment professionals pursued a career in investment management because they are passionate about financial markets.

  • Despite this passion, there is a disconnect from purpose. Just 15% of EMEA respondents said they remain in the investment management industry for the purpose of helping clients achieving financial goals, and only 6% to contribute to economic growth.

  • Only 40% of professional investors in EMEA believe their leaders articulate a compelling vision for the future

  • 34% agree leaders in EMEA talk to employees about their most important values and beliefs

  • 33% believe leaders are spending time teaching and coaching employees


“The research clearly shows that phi is an important variable that can be used to recalibrate the behaviors of investment professionals and leadership plays a pivotal role,” continued Kheddache Jendeby. “By instilling phi, they can move beyond improving their own financial returns and put their clients’ interests first. When they do so, they can increase organizational performance as well as gain the trust and loyalty of their clients and employees. For an industry obsessed with results, we believe this is an extremely compelling discovery.”



About State Street Corporation

State Street Corporation (NYSE: STT) is one of the world's leading providers of financial services to institutional investors, including investment servicing, investment management and investment research and trading. With $29 trillion in assets under custody and administration and $2 trillion* in assets under management as of December 31, 2016, State Street operates in more than 100 geographic markets worldwide, including the US, Canada, Europe, the Middle East and Asia. For more information, visit State Street’s website at

*Assets under management include the assets of the SPDR® Gold ETF (approximately $31 billion as of December 31, 2016), for which State Street Global Markets, LLC, an affiliate of SSgA, serves as the distribution agent.

About CFA Institute

CFA Institute is the global association of investment professionals that sets the standard for professional excellence and credentials. The organization is a champion for ethical behavior in investment markets and a respected source of knowledge in the global financial community. The end goal: to create an environment where investors’ interests come first, markets function at their best, and economies grow. CFA Institute has over 140,000 members in 157 countries and territories, including 134,000 CFA charterholders, and 147 member societies. The CFA Institute Future of Finance initiative is a long-term, global effort to shape a trustworthy, forward-thinking investment profession that better serves society. For more information, visit

1 Survey of just under 7,000 investors, investment providers, government officials and regulators in 20 countries including 727 financial professionals in the EMEA region

2 Survey respondents were asked to evaluate their organization on a scale of 1-5 on 10-year organizational performance, client satisfaction, and employee engagement. Performance was broadly defined, not limited solely to investment performance, which allowed for a relative assessment of firms across firm types and investment strategies, though given the industry we expect investment performance to be a primary driver of the responses.


To relate phi to outcomes, the following odds were modeled:

θ1 = prob(score = 1) / prob(score > 1 )

θ2 = prob(score = 1, 2) / prob(score > 2 )

θ3 = prob(score = 1, 2, 3) / prob(score > 3 )

θ4 = prob(score = 1, 2, 3, 4) / prob(score > 4 )


All odds are of the form θy = prob(score ≤ y) / prob(score > y)


The functional form of the model for each outcome, using phi as an independent variable, is:

ln(θy) = αj – βΦ

Using Huber-White standard errors. Incremental percentage improvements in the odds of “excellent” outcomes were derived using an odds-ratio interpretation.

Important Information

Investing involves risk including the risk of loss of principal.

The information provided does not constitute investment advice as such term is defined under the Markets in Financial Instruments Directive (2004/39/EC) and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell any investment. It does not take into account any investor's or potential investor’s particular investment objectives, strategies, tax status, risk appetite or investment horizon. If you require investment advice you should consult your tax and financial or other professional advisor. All material has been obtained from sources believed to be reliable. There is no representation or warranty as to the accuracy of the information and State Street shall have no liability for decisions based on such information.

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Expiration date: 02/28/2018



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