Date: 19.04.16 Category: Ethics & Professionalism
These responsibilities are made clear in CFA Institute’s Code of Ethics and Standards of Professional Conduct. All candidates in the CFA Program study the code and standards at each of the three stages of the examination process and every member annually attests to abide by and adhere to the standards. All CFA Institute members and CFA Program candidates learn that the core value of their professionalism is to place their clients’ needs above their own.
The emphasis on professionalism should be unsurprising. As Nitin Mehta, CFA, managing director for CFA Institute in the EMEA region has noted previously: ‘Investment professionals owe a duty of care to their clients and to the market. We would not expect doctors and other medical professionals to be able to practice without having first received proper training in the technical and ethical practices required. We should require the same standards and ensure that those working in investment management are qualified to act professionally.’
In its recent report on ‘Building real markets for the good of the people’, the Bank of England noted that to promote prosperity financial markets need to meet two conditions: they must be effective (operating competitively to allocate capital and risk) and must maintain their social licence. While the Bank of England was commenting primarily on the operation of the capital markets, the investment market also relies to some extent on a social licence. To do so effectively, the investment profession will need to hold itself to standards that are demonstrably designed to serve clients’ interests. As in medicine, investment professionals cannot be certain about the outcomes for those they serve, but they can set out to help them as far as they are able and should emulate medicine’s best practices around communication. CFA UK’s 2014 paper on informed consent noted:
‘The typical saver is unaware of the range of possible investment options, their likely ‘success’ and the risks associated with them. An investment professional has a responsibility for the financial health of their client akin to the responsibility a doctor has for their patient’s wellbeing. Like the medical profession, investment professionals should establish and maintain effective partnerships with clients and, where appropriate, their representatives based on openness, trust and good communication’.
Given the role the investment sector already plays in safeguarding and allocating capital, it is important that its social license is maintained. With the sector’s increasing involvement in the provision of pension outcomes and in the provision of long-term capital to the corporate sector, it will be increasingly important that the investment profession is not just seen as necessary, but as carrying out activities that are trusted and approved by society.
Based on the conversations that we have held for this report, the profession embraces this responsibility. Professionalism encompasses such qualities as fairness, accountability, honesty and competence, and stakeholders agree that investment is a professional activity and should be practised in that fashion. They believe that practitioners must be trained, tested and held to high ethical and professional standards. In many areas (such as law and medicine), such standards are regulatory requirements for practitioners. In others, including investment management, regulatory standards are set at a lower level. While professional qualifications and standards are often demanded by clients and employers, they are yet to be extensively required by regulators.
Read more in our report.