The Importance of Ethics for the Future of the Investment Profession, Kolkata

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On May 31st IAIP Kolkata had an opportunity to host Alexander Flatscher, Director, CFA Codes and Standards, Asia Pacific, CFA Institute, on the Importance of Ethics for the future of Investment Profession. He began by comparing Ethics to the foundation of a building and then proceeded to demonstrate its relevance in the banking and financial services industry. He cited results of survey which indicated that even used car salesmen command a greater consumer trust as compared with professionals in the financial services industry.

He highlighted the implications of trust deficit with the following cause & effect relationship:

trust deficit

He explained that the following major factors were responsible for the unethical conduct of the people:

  • Obedience to Authority
  • Conformity to Bias
  • Self serving bias
  • Incrementalism
  • Group Thinking
  • Over confidence / optimism

In the light of recent scandals and the consequent impact on the entire asset management industry, Flatscher suggested that it was imperative for firms to follow fundamental ethical principles. He was of effusive in his view that the firms can increase customer confidence by voluntarily complying with the CFA Institute Asset Manger Code of Professional Conduct. This would provide several benefits like better reputation for compliant firms, a new promotional tool to increase market awareness etc. Currently, 750+ firms in over 25 countries claim compliance to the Asset manager Code. Claiming compliance is easy and is similar to claiming compliance for GIPS, with firms required to complete and submit a form available for download from the CFA Institute website.

Flatscher ended the session with a brief note on possible reasons behind the reluctance of firms to adopt the Code, as well as the steps planned by the CFA Institute to overcome those hurdles.

Contributed by: Abhishek Shah, IAIP Volunteer

Photographs by: IAIP Volunteers

Presentation at:  http://www.cfasociety.org/india/Pages/ContinuingEducation-Presentations.aspx  

About IAIP

India Association of Investment Professionals (IAIP), which is established April 2005 and located in Mumbai, is an association of local investment professionals. As one of the 136 CFA Institute member societies, IAIP connects members to a global network of investment professionals. Consisting of portfolio managers, security analysts, investment advisors, and other financial professionals, IAIP promotes ethical and professional standards within the investment industry, facilitates the exchange of information and opinions among people within the local investment community and beyond, and works to further the public’s understanding of the CFA designation and investment industry.
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