US calls on Australia to put investors first

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CFA Institute, the global association of investment professionals, has proposed the concept of an ‘Investor First’ day to emphasise that all participants in the financial sector should put the investor first, and it’s targeting Australia.

Paul Smith, CFA Institute’s Asia Pacific managing director says that this is a prerequisite for improving investors’ trust in the financial system.

“We’ve already started to do this in the US and we’re taking the concept national there. Australia is one of the countries in which we’d also like to see such a day adopted,” says Smith.

“While Stronger Super and Future of Financial Advice reforms are a step in the right direction, the new Coalition government has the opportunity to further steer Australia’s investment industry towards a more transparent system, instilling a renewed focus on ethical behaviour rather than focusing on performance-centric standards.”

Smith says that investors expect the government to help build trust in capital markets. A CFA survey found that 52% of investors believe national and global regulators have the greatest opportunity to effect change and enhance trust.

“However, it is up to us all, including CFA charterholders, fund managers, brokers, advisers and regulators, to build a more robust and trustworthy financial system,” says Smith. 

The recently released CFA Institute & Edelman Investor Trust Study shows that investors worldwide have little trust in the investment industry. The survey of over 2100 retail and institutional investors in the US, UK, Hong Kong, Australia and Canada found that 53% trust investment firms to do what is right. The survey found retail investors are less trusting of the industry (51%) than their institutional counterparts (61%).

Globally there are more than 110,000 CFA charterholders. Australia is the ninth largest market of CFA candidates in the world with 1861 CFA charterholders. 

John Rogers, president and CEO of CFA Institute believes the world is on the cusp of a new era of investment behaviour called ‘fiduciary capitalism’, where long-term asset owners globally, including Australian pension funds, are putting beneficiaries’ long-term interests first. 

"To have a fiduciary mindset means acting solely in the interests of their clients. The agenda of fiduciary asset owners is long-term, which involves minimising costs, making sure their assets match their liabilities and taking into account all the externalities – both positive and negative – that result from their investment activities," said Rogers.

Rogers believes Australia is well positioned to lead the way in fiduciary capitalism.

“Australia has a well-developed fiduciary environment given the rise of the compulsory superannuation, which started with Paul Keating. Australian super funds have been at the forefront of development and adoption of socially responsible investing (SRI), for instance.”

  • alleycat on 28/10/2013 4:33:35 PM

    I find these comments a bit rich coming from a country that gave us Lehman Bros, Enron etc and lets not forget they were architects of the GFC.
    Where was the concept of putting the client first prior to 2007/2008 ?

  • Matthew Ross on 28/10/2013 8:50:44 PM

    One day? A profession does it for 365 days a year, not just one day.

    The thought is nice Paul, but the idea sucks. It positions us in a very bad light...

    "Oh look, financial planners are having a Investors First day - what do they do for the other 364 days".

    Maybe you could trial it in the US first...maybe I speak for the rest of Australia when I say we're not interested in being the guinea pig on this one.

  • Eric Taylor, CPA on 29/10/2013 1:58:53 PM

    One simple comment - Pot; Kettle; Black... say no more.

  • Innocent Observer on 30/10/2013 10:39:41 AM

    Guys, the suggestion is coming from the CFA Institute (CFAI). Their ethical guidelines and standards are as watertight as you can get.

    As for what they did in the US and whether or not there is a place for it in Australia, well I'm not so sure.

    On the part of whether institutional investors trust the investment industry, I really don't care. Hell, I work with insto clients and I am constantly reminding them to err on the side of caution.

    The retail side is different though. This, I feel, is more a function of the vast advertising campaigns put out to disparage the advice profession based on half-truths (ISN are happy to take member fees and ICRs, but when advisers charge a fee it's "commission").

    At any rate. As a profession wouldn't it be great if we could all agree on a simple ethical and best-practice framework, and impose massive fines, public shame and expulsion from the industry for any breach? (and I don't mean red-tape slip-ups, but stuff that is actually harmful to clients or the integrity of our profession). Allow the good guys to keep on keeping on, and smash the crooks out of the park (they can join their pals selling property)

  • James Howarth on 30/10/2013 1:09:30 PM

    Should anyone take financial advice from the US anymore. How about you balance your books USA. How about you stop printing money and go back to the gold standard.

    All empires collapse due to unrestrained money printing.

  • Innocent Observer on 30/10/2013 1:39:21 PM

    @James, refer to my previous comment.

    The CFAI is not "the US" (though born in the USA), it's an internationally represented organisation. It's core focus is on market integrity and professional/ethical standards.

    www.cfainstitute.org

  • James Howarth on 30/10/2013 2:11:00 PM

    It's a tool of US hegemony

  • Pat on 30/10/2013 6:55:56 PM

    Innocent Observer sums it up well - this is not a view of the "US", as poorly inferred in the headline to this article.

    It is the view of the Asia Pacific MD of the CFA Institute. It is actually pretty poor editing for the headline to be written as such.

    And pretty poor form of the commentators here buying into it as such. Or just lazy.

WP forum is the place for positive industry interaction and welcomes your professional and informed opinion.

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