CFA Society Melbourne

How We Can Improve The Industry

  • Where do we want to be as an industry?

    October 19, 2015


    Below is a speech presented by Paul Smith at the 2015 Australia Investment Conference. Click here to view the accompanying presentation slides which provide an introduction to the “ethical road map”

    Where do we want to be as an industry?

    Paul Smith, President and CEO, CFA Institute

    Sydney, October 13th 2015

    As we know, the investment management industry is at a crossroads, largely because investors no longer see the value the industry brings to society.
    CFA Institute recognises that consumer trust in the financial services industry is at an all-time low and that only meaningful changes to the financial services industry can restore that trust.

    We have made it our top priority to work with our members and the entire investment community to rebuild trust and build a sustainable investment profession − one that ultimately drives a better market for investors. As we set out to make change, this means putting the interests of investors first. It also means building positive culture based on ethics, market integrity and high standards of technical excellence.

    This is particularly true here in Australia, where nearly every member of the community is an investor through mandated superannuation. CFA Institute recognises that this is a key community issue that must be addressed for the health of the financial system and society as a whole.

    Our ability to add value is being pressured on many fronts. Regulators everywhere are now turning their attention to investment managers. They are scrutinizing our culture, our interactions with customers, and our effectiveness in implementing required regulatory changes. This regulatory focus will continue to increase through 2020.

    Here in Australia we’ve seen attacks on the banks by the Australian Securities and Investments Commission as you can see here by this quote by ASIC Chairman Medcraft.

    The Federal Government is conducting an “Inquiry into proposals to lift the professional, ethical and education standards in the financial services industry.” We commend their actions and we look forward to seeing the final recommendations.

    We are also watching the Parliamentary Committee proposal to establish an independent council to oversee standard setting across the financial advisory community.

    And we are glad to see the Australian Banking Association’s interest in ethics and ethics training in response.

    Today, I’d like to give you “two sets of three.” The first three points are an action plan recently developed by our leadership team. I am traveling around the world delivering these points whenever I get the opportunity. The second three points are specific to Australia and New Zealand and have been developed by your advocacy leaders and volunteers.

    Our three point action plan starts with setting high standards of entry and professionalism.

    We have to do a better job of demonstrating what it means to be a profession by promoting the highest standards of education, competence, and professional conduct. When we visit the doctor we assume he/she is qualified and competent to diagnose whatever it is that ails us. Investment managers don’t yet have this level of respect and trust from society. Many of our colleagues have few, if any, qualifications, thus why should society trust our competence to serve their investing needs? We have to set high standards of entry into the profession and demonstrate the highest levels of professionalism.

    Our second action is to create business models geared toward achieving investor outcomes.

    This means better partnership with industry leaders to develop professionalism at every level of their firms. Specifically, we need to abandon short-term, product-pushing models and re-orient the business to achieving agreed-upon investor outcomes, not just profit maximization. We need to establish incentive and fee structures measured on achieving investor outcomes and create products with transparent fee structures that represent value for money invested. This will only happen if we effect change from the inside out.

    The third action is to advocate for regulations that align firms and clients.

    We have to make change happen by advocating for policy research and thought leadership that benefits investors and society at large. This will foster the health and future success of the investment management profession. Investors have the right to be served by professionals who act as fiduciaries of their savings. They also deserve an underlying investment environment that is fair and transparent. As a professional body, it is our duty to exercise discipline within the profession and ensure that the profession nurtures an environment where investor interests are placed above all others.

    This takes me to the next three points, which are specific to Australia’s advocacy efforts but are also applicable in other countries.

    Your advocacy team asked themselves: “Where do we want to be as an industry here in Australia?” They developed these three end goals:

    First, we want to be regarded by the community as highly competent, deserving guardians of their money and trusted champions for their rights and welfare. Investors have two rightful demands from the industry that serves them:

    An instilled sense of ethics and of market integrity to build a strong industry culture that guides actions and decisions – compliance.

    High standards of technical excellence to inform ethical decision-making – competence.

    Second, we want to be acknowledged by regulators as a profession whose culture is largely self-governing, serving the best interests of the community. CFA Institute is already regarded as a highly respected source of knowledge in the global financial community and a trusted adviser to governments and regulators around the world on industry issues. Our comprehensive standards and programs have been adopted by industry globally. No other organization is better positioned to take this on globally than CFA Institute and locally by CFA Australia.

    On this front, the industry in Australia needs an ethical leader. We are the “go to” source and we have an opportunity to assume a broader / deeper ethical adviser role.

    Third, we want to be respected by our peers globally as a centre of excellence in the provision of world-class financial services practice and talent. We have nearly 2,500 charterholders in Australia, including some of the most reputable members of the financial services industry.

    Here in Australia, you have an advocacy team with the aim of partnering with like-minded peers who want to align themselves to build and sustain a culture in Australia that delivers this future for our local industry.

    The advocacy team has been working on a model that represents the direction of its work. They are calling it ‘the ethical model.’ At the center of the model is what we all are striving for – an ethical culture. There are two important factors that drive the creation of an ethical culture. First is Personal Commitment. We all have to have our hearts in it, right? Second is Partnering with the Industry, represented by this little ear which stands for listening.

    Supporting an ethical culture are two activities: building and sustaining.

    These activities are performed by both individuals and by organizations.

    The outcomes are competency and compliance.

    And the tools and resources we have at our ready are shown here and include everything from our credentialing programs to our codes, standards, and other tools we have created such as ethics training and the statement of investor rights.

    Here is the process we see taking place. CFA Institute meets with an organizations and individuals, and engages in discussion. Needs are then identified and we present the ethical model as a tool to explain our vision of how ethical models can be developed. Together with the client we then articulate the challenge, the problems and possible solutions. The final step is to create a unique tailored ethical road map for that organization or individual.

    Here is an image of what an ethical map might look like. It will be a detailed view of how an organization or individual has mapped out their work towards building and sustaining an ethical culture. These will serve as case studies to help others map out how they will attain an ethical culture.

    The next logical question is: What can you do?

    You can lead the change as individuals by being the link between the industry and our best practice model

    Think about what you want to accomplish and the best way to manage change that will ensure high standards

    Advocate for the highest standards of technical excellence to inform across-the-board ethical decision making

    Go forth and spread the word.

    You can set objectives for good culture within your firm and across the industry − partner with your society on this

    We can help with processes to change manage your organizational culture

    We can’t do it for you, but we can provide the tools for building and customizing professional competencies and raising standards

    There are local initiatives to sustain positive culture, including ESG volunteering programs, ongoing education, access to latest knowledge and research, world class experts

    You can volunteer – find out how you can contribute

    If you want to know more, please contact Sue Morey who chairs the local advocacy effort.

    If CFA Australia is to secure its place as an ethical adviser then you will need to address these issues I’ve mentioned today. We need renewed levels of activist volunteers, those of you who believe in this model, and can support it or just want to learn more.

    As leading ethical advocates, we can use our collective knowledge and experience to propose solutions and lead positive change for the benefit our society.

    Thank you.



  • An Overview of Compliance with the CFA Institute Asset Manager Code of Professional Conduct

    July 19, 2015

    Market Integrity and Advocacy Webcasts
    CFA Institute Live Webinars
    Source: CFA Institute

    00:51:55, audio webcast, recorded on 28 January 2015
    Posted on 28 January 2015



    Asset owners are increasingly asking their investment managers about the CFA Institute Asset Manager Code of Professional Conduct (“the Code”). Investors place a significant emphasis on ethics and integrity when selecting an outside manager. Asset Manager Code compliance is a critical step any asset manager can take to demonstrate a strong commitment to working in the best interest of clients.

    Hundreds of firms, including the likes of BlackRock, Inc., LGM Investments, and TD Asset Management have made this commitment and claim compliance with the Asset Manager Code. Is your firm on the list? If not, what’s holding you back?

    CFA Institute Director of Professional Standards Jon Stokes and Director of Standards of Practice Glenn Doggett, CFA, provide guidance on how to comply with the Asset Manager Code of Professional Conduct and how it can make a difference for your organization, including:

    • Why asset owners/investors are interested in the Code
    • An overview of significant provisions of the Code
    • Commonly asked questions about compliance
    • How to incorporate the Code into the RFP process

    This is an archived recording of a live webinar that took place on 28 January 2015.


  • CFA Institute & Edelman Investor Trust Study

    February 26, 2015


  • Charting Effective Financial Reform in Asia

    September 4, 2014

    Andrew Sheng is president at Fung Global Institute. Previously, he served as chairman of the Securities & Futures Commission of Hong Kong and as a central banker at the Hong Kong Monetary Authority and at Bank Negara Malaysia. CFA Institute Annual Conferences 2013 CFA Institute Annual Conference

    Source: CFA Institute 31 min, video webcast, recorded on 20 May 2013


  • Market Integrity and Advocacy Webcasts Challenging Industry Norms

    September 4, 2014

    Source: CFA Institute 35 min, video podcast, recorded on 24 September 2010


  • Ethics and Integrity in the Investment Profession: Where It Stands and What Is Needed

    September 4, 2014


  • Challenging Industry Norms: The Future of Finance

    September 4, 2014

    Mark P. Delaney, CFA; Aaron Low, CFA. 22 mins


  • A Crisis of Culture Report: Valuing ethics and knowledge in financial services

    September 4, 2014

    Source: CFA Institute