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.”