THE FUTURE OF FINANCE TOWARDS A SUSTAINABLE FINANCIAL ECOSYSTEM Barbara S. Petitt, PhD, CFA Director, Curriculum Projects, EMEA 28 November 2013
CFA INSTITUTE’S FIVE ORGANIZATIONAL PILLARS Ethical • Championing ethical behaviour in Champion investment markets. Global • Creating a strong community of Community investment professionals. Industry • Being a respected source of knowledge in Knowledge investment markets. Professional • Raising standards of professional Excellence excellence in the investment industry. The Greater • Build an investment industry that serves Good the interests of investors and society. 2
THE FINANCIAL ECOSYSTEM Providers Users of of Intermediaries Capital Capital MAIN POINT Groundskeepers: Opiners • Regulators Traders • Self-Regulatory Organisations of Capital • Universities • etc. Capital Assets/Securities Opinions 3
THE SOCIAL CONTRACT BETWEEN FINANCE PROFESSIONALS AND THOSE WE SERVE HAS BEEN BROKEN 4 4
“The problems should have gone away “A scandal over rigging of key interest “From a busted broker with missing when Congress passed financial rates could plunge the global customer money to billion dollar reforms in 2010. But problems in the banking industry into a legal morass trading blunders to lying about industry still exist.” that could last years…” LIBOR…” 5
THE FINANCIAL ECOSYSTEM HAS GONE AWRY Global Global Economy Economy 6
WE MUST RESTORE TRUST IN FINANCE According to the 2013 Edelman Trust Barometer, the financial services industry is the least trusted industry globally. LAST! 7
From “Stewardship” by John Taft. This material is reproduced with permission of John Wiley & Sons, Inc. 8
ETHICS IS CORE 56% of respondents blame poor ethics 9
THE COSTS OF FAILURE OF TRUST Investors who do not trust the industry are unlikely to: • Save and invest for their future • Achieve their long-term financial objectives A “savings gaps” means: • Longer working lives • Lower quality of life • Intergenerational stress Social impact 10
WE MUST RESTORE BALANCE TO THE FINANCIAL ECOSYSTEM 11
FUTURE OF FINANCE http://www.cfainstitute.org/learning/future/about/Pages/index.aspx 12
MISSION To lead the investment profession globally by promoting the highest standards of ethics, education, and professional excellence for the ultimate benefit of society . STRATEGY Broader Mission + Bolder Voice + Bigger Community FRAMEWORK The Future of Finance Starts With You To shape a trustworthy, forward-thinking financial industry that better serves society 13
CFA INSTITUTE AND EDELMAN 2013 INVESTOR TRUST STUDY CFA Institute and Edelman partnered to understand the state of trust in the investment industry. The study conducted in July 2013 surveyed 1,604 retail and 500 institutional investors in the United States, United Kingdom, Hong Kong, Canada and Australia. 14
FUTURE OF FINANCE TOPIC AREAS 15
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FUTURE OF FINANCE TOPIC AREAS Our Goal: To foster a trustworthy environment in which financial agents serve their clients in an ethical and professional manner. Key Solutions: • Statement of Investor Rights • Asset Manager Code of Conduct 17
STATEMENT OF INVESTOR RIGHTS Demanding that financial professionals abide by these rights helps you build trust in the person and/or firm you engage with, and thereby collectively restore trust, respect, and integrity in finance. WHEN ENGAGING THE SERVICES OF FINANCIAL PROFESSIONALS AND ORGANIZATIONS, I HAVE THE RIGHT TO… 1. Honest , competent, and ethical conduct that 7. Clear, accurate, complete and timely complies with applicable law; communications that use plain language and are presented in a format that conveys the information 2. Independent and objective advice and assistance effectively; based on informed analysis, prudent judgment, and diligent effort; 8. An explanation of all fees and costs charged to me, and information showing these expenses to be fair and 3. My financial interests taking precedence over those reasonable; of the professional and the organization; 9. Confidentiality of my information; 4. Fair treatment with respect to other clients; 10. Appropriate and complete records to support the 5. Disclosure of any existing or potential conflicts of work done on my behalf. interest in providing products or services to me; 6. Understanding of my circumstances, so that any advice provided is suitable and based on my financial objectives and constraints; 18
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FUTURE OF FINANCE TOPIC AREAS Our Goal: To support financial education by providing resources that will help Investment professionals make decisions that better serve their clients. Key Solution: • CFA Institute Education Products • Financial Market History Project Claritas Investment Certificate 20
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FUTURE OF FINANCE TOPIC AREAS Our Goal: To encourage sound retirement planning based on understanding of key issues. Example: Pension Trustee Code of Conduct 22
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FUTURE OF FINANCE TOPIC AREAS Our Goal: To promote markets that ensure that all investors have access to accurate, complete, relevant, and timely information so that they can make sound decisions. Key Solution: Principles for Investment Reporting 24
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FUTURE OF FINANCE TOPIC AREAS Our Goal: To advocate globally for workable regulatory and market solutions that promote fair and efficient capital markets. Recent examples: • Report on Dark Pools • Comment letter to the European Parliament on Market Manipulation 26
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FUTURE OF FINANCE TOPIC AREAS Our Goal: To create a better understanding of and develop resolutions for existing and potential risks that could adversely impact the global financial system. Key Initiatives: Seek influential partnerships and support activities to promote a sound financial system, e.g., the Systemic Risk Council 28
HOW CAN YOU MAKE A DIFFERENCE? Focus Areas Ecosystem Actors • Providers of Capital • Users of Capital • Intermediaries Impact • Traders of Capital on • Regulators ACTION Future of • Analysts Finance • Investment Managers • Universities • Media 29
HOW CAN YOU HELP REBUILDING TRUST IN THE FINANCIAL ECOSYSTEM? The CFA Institute Integrity List is a collection of 50 tangible steps that investment professionals can take to restore trust in the investment industry. The list was inspired by “real-world” ideas from CFA charterholders and members. • Require training on ethical decision-making for yourself and your firm. • Place the client’s interests before your own. • Name and shame unethical behaviour. • Recommend products with transparent payoffs, costs, and risks. • Help clients focus on risk as much as they do on performance. For complete CFA Institute Integrity List online, visit: www.cfa.is/50WaysRestoreTrust 30
VISIT THE FUTURE OF FINANCE WEBSITE CFAInstitute.org/FutureFinance Designed to drive engagement and sharing Focus on depth of content on Future of Finance topic areas, with continual updates Centerpiece of a integrated communications campaign: advertising, public relations, social media, etc., focused on “The Future of Finance Starts With You” Putting Investors First Financial Knowledge Safeguarding the System Transparency & Fairness Regulation & Enforcement Retirement Security 31
THE FUTURE OF FINANCE ADVISORY COUNCIL Robert C. Pozen , Chair Andrew Lo , Charles E. Senior Lecturer, Harvard John Kay , Economist and and Susan T. Harris Business School and Author Professor of Finance at the Senior Fellow, MIT Sloan School of Brookings Institution Management and Director of MIT's Laboratory for Financial Engineering Mary Schapiro , Ira M. Millstein , Senior Keith Ambachtsheer , Managing Director at Partner, Weil, Gotshal & Director, Rotman Promontory and Former Manges LLP, and Co-Chair International Centre for Chairman of the U.S. of the Millstein Center for Pension Management, Securities and Global Markets and Rotman School of Exchange Commission Corporate Ownership, Management, University (SEC) Columbia Law School of Toronto Ng Kok Song , Adviser Andrew Sheng , Paul Chow , Former Chief and Chair of Global President, Fung Global Executive, Hong Kong Investments at the Institute Exchanges and Clearing Government of Limited Singapore Investment Corporation (GIC) Barbara Novick , Vice Elizabeth Corley , CEO, Robert Shiller, Sterling Chairman, BlackRock Allianz Global Investors Professor of Economics at Yale University Saker Nusseibeh , CEO John Taft , CEO at RBC Tom Keene , CFA, and Head of Investment, Wealth Management Editor-at-Large, Hermes Fund Managers Bloomberg News 32
THE FUTURE OF FINANCE STARTS WITH YOU! 33
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