CFA UK’s Ethics Committee identifies key areas where market practioners can make a difference.
The limits of regulation are clear. Market participants will seek out marginal gains and opportunities for arbitrage. From such a starting point it is, by definition, just a small step over the line into wrong-doing. Distinctions which appear clear from a distance become surprisingly hazy at close quarters.
Especially if the steps towards infringement are incremental, it is all too easy to tiptoe into a minefield. Only practical guidance in support of strong ethical approaches can keep practitioners clear of career-ending transgressions.
Education is the most important means of ensuring the right behaviour – but it is critical that this be substantive and not merely formal. It cannot be something that occurs once at the outset of a career, is learnt by rote and then promptly forgotten.
It must not be delivered in a dry, dusty and theoretical way. A continuing and engaging process is vital. To be effective, education needs to be reinforced regularly using real world examples and practical guidance.
Culture is also very important and is where the leaders of financial services firms can have their greatest impact. The evidence is clear that while unethical behaviour can result in short-term gains, the longer-term profitability (and viability) of a firm is much better served by ethical and client-oriented behaviour.
Employers, via their senior leadership, can build a culture that prizes the right behaviour. This is not only a matter of leading by example but also of rewarding the correct approaches (and not merely the desired immediate results). Encouraging and protecting whistleblowers and ensuring proper continuing education are also vital.
However easy it is to fall into the trap of focusing exclusively on short-term gain, we must remember that this is not the sole purpose of our activities; our ultimate goal is to deliver the objectives of our clients. We work, for example, to provide a reasonable standard of life for our clients’retirement, or to enable them to insure themselves against misfortune. Firm profitability is the result of achieving these goals successfully – not the primary objective to which our client goals can be sacrificed. It is through a recognition of these realities that we become true professionals.
The more we can behave as a profession rather than an industry – to keep that public purpose front and centre and to genuinely act in our clients’ interests – the closer we will come to regaining the trust and respect of the public.