Date: 19.04.16 Category: Ethics & Professionalism
Why is the investment profession important?
There is a democratisation of investment risk – individuals are taking a greater responsibility for their savings, for pensions for example. There is a demand
on the part of the consumer for guidance and for help in investing their assets. Now more than ever this is an imperative – there is a genuine social need and we have a duty of care to give those people investment outcomes that meet their liabilities and aspirations.
What does the profession have to do?
There is a sense of trying to explain how financial liabilities can be turned into desired investment outcomes. That demands a level of transparency in terms of explaining risk, of explaining how we charge fees and in terms of setting sensible expectations of how those outcomes can be met. We used to talk in a two-dimensional return space, but now we have many more parameters such as volatility or the nature of the investment journey. It cannot be explained in a traditional environment.
So how should the profession be speaking?
I think the industry needs to engage in a different type of dialogue – one that’s framed around optimising client’s outcomes, subject to multiple constraints. The industry needs to think about the language and how to explain these issues and these investment outcomes over time. There is a need for a greater degree of sophistication in the discussion.
In the past it was the intermediaries who solely handled that conversation but now we, alongside the intermediaries, need to speak to clients directly, especially individual savers. Explaining areas where there is a great deal of complexity in a straightforward manner can be a challenge. We have to realise we now have to have a different sort of conversation with a different audience.
How are we doing as a profession?
The industry is changing and it requires us to think differently. It’s getting better but within the industry it’s still quite divided between those who understand that need to change and those who are still working in the old world. We think ethics are very important in keeping the professionalism of the industry pointed in the right direction and the CFA exams are very helpful in that.
Society has changed and the expectations on fund managers have shifted, so it’s incumbent on us not just to explain what performance has been achieved, but how it has been achieved. That then speaks to other areas such as the stewardship and governance agenda and socially responsible investing, as well
as the ethics within the fund business itself. We need to stay relevant and this is absolutely critical to staying relevant.
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