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BUILDING A RELATIONSHIP BASED ON TRUSTWhere do most people get investment advice from?
• Family
• Friends
• Referrals (from friends & family)
Why?
• Because they trust them
• Right or wrong, appropriate or not, they do not have ulterior motives or motivations
“Trust is the building block that enables capital markets to serve society’s needs.”-CFA Institute
From “Stewardship” by John Taft. This material is reproduced with permission of John Wiley & Sons, Inc.
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WHAT WORD COMES TO MIND WHEN YOU HEAR “WALL STREET”?
Media
Banks
Financial Services
Energy
Pharmaceuticals
Consumer Packaged Goods
Food and Beverage
Automotive
Technology
51
53
54
60
61
66
67
71
78
Financial Services
Banks
Media
Pharmaceuticals
Energy
Consumer Packaged Goods
Food & Beverage
Automotive
Technology
48
51
51
59
59
65
66
70
79
According to the Edelman Trust Barometer, the financial services industry is among the least trusted industries globally.
WE MUST RESTORE TRUST IN FINANCE
Question: Please indicate how much you trust businesses in each of the following industries to do what is right.
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2014 2015
Lack
of e
thica
l cult
ure
within
finan
cial fi
rms
Poor g
over
nmen
t reg
ulatio
n an
d en
forc
emen
t
Mar
ket m
icro
struc
ture
I don
’t thin
k the
re is
lack
of t
rust
in th
e fin
ance
indu
stry.
Other
63%
16%
6% 4%12%
59%
15%
6% 4%
16%
65%
16%9%
5% 5%
67%
17%
4% 3%9%
GLOBAL AMER APAC EMEA
“No opinion” option excluded from results.
WHICH FACTOR DO YOU THINK HAS CONTRIBUTED MOST TO THE CURRENT LACK OF TRUST IN THE FINANCE INDUSTRY?
Source: Global Market Sentiment Survey 2015
WHICH ONE OF THE FOLLOWING FIRM LEVEL ACTIONS IS MOST NEEDED IN THE COMING YEAR TO HELP IMPROVE INVESTOR TRUST AND CONFIDENCE?
“No opinion” and “Other” excluded from results.Source: Global Market Sentiment Survey 2015
31%27%
21%
9%6%
3%
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Investors who do not trust the industry are unlikely to:• Save and invest for their future• Achieve their long-term financial objectives
A “savings gap” means:• Longer working lives• Lower quality of life• Intergenerational stress
THE COSTS OF FAILURE OF TRUST
Social impact
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THE ECONOMIST INTELLIGENCE UNITStatistical Highlights: 380 Financial Service Execs Globally
Ethics
· 91% of survey respondents placed equal importance on ethical behavior and financial success.
· 67% of firms have raised awareness of the importance of ethical conduct by all employees
· 53% of financial services executives say strictly adhering to ethical standards inhibits career progression at their firm
Financial Knowledge
· 62% of financial executives don’t know what is going on outside their department
· 60% of financial executives highlight gaps in employees’ knowledge as a significant risk for their firm
· 59% of financial executives agree improving knowledge of the industry as a whole would help make their firm more resilient
· 12% say they are confident in their knowledge of the global regulatory environment
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EIU RESULTS
What is CFA Institute doing about issues addressed in report:
The report reaffirms the need for strong global adoption of ethics and standards, which is at the heart of the CFA Institute mission. Actions taken by CFA Institute to address these issues include:
1. CFA Program and Claritas education programmes which include ethics and client service modules
2. The global code of professional conduct that CFA charterholders sign up to on an annual basis, alongside other codes of conduct such as the Asset Manager Code and Pension Trustee Code
3. Future of Finance content and tools
4. Freely available webinars and training tools focused on ethics education
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Future of Finance Strategic Objective:To shape a trustworthy, forward-thinking financial industry that better serves society.
The future of finance will be better if financial market practices are fair and financial service providers put investors’ interests first.
CFA Institute mission: To lead the investment profession globally by promoting the highest standards of ethics, education, and professional excellence for the ultimate benefit of society.
What
FUTURE OF FINANCE INITIATIVE
How
Why
We will accomplish this by creating, curating, and sharing content, as well as engagement tools, that will motivate industry practitioners and stakeholders to demonstrate professionalism and integrity, both individually and as an industry. The Future of Finance themes provide an organizing framework and a structure and platform for engagement.
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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.
FUTURE OF FINANCE AREAS FOR REFORM
Financial Knowledge
Retirement Security
Regulation & Enforcement
Putting Investors First
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Transparency & Fairness
Safeguarding the System
Making a difference individually Making a difference collectively
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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
FUTURE OF FINANCE TOPIC AREAS
Putting Investors FirstThe duty to protect investor interests
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50 actions you can take to build trust and enhance your firm’s reputation — inspired by “real-world” ideas from CFA charterholders and members
To view the CFA Institute Integrity List online, visit:cfainstitute.org/integritylist
THE INTEGRITY LIST
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PUTTING INVESTORS FIRST MONTH: MAY 2015• Inspired by the Statement of Investor Rights, our members have begun an annual awareness campaign.
• In May of 2015, its second year, activities took place in 98 cities, representing 85,000+ members. The goal was to share the importance of putting investor interests first.
• 13 U.S. governors declared proclamations, 10 new translations of the rights or other investor tools were produced, and 6 stock exchanges held ceremonies. Dozens of educational conferences and outreach events were held, many in partnership with other groups.
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Americas (55)ArkansasAtlantaAustinBahamasBostonBuffaloCalgaryCaymanChicagoClevelandDallas/FWDaytonDetroitEast TennesseeHawaiiHouston JacksonvilleKansas CityLos AngelesMadison
MemphisMiamiMilwaukeeMinnesotaMississippiMontrealNaplesNashvilleNew MexicoNew YorkOkanagan OklahomaOrange CountyOrlandoOttawaPhiladelphiaProvidenceSan AntonioSan DiegoSan FranciscoSaskatchewan
SeattleSouth FloridaSpokaneSt. LouisStamfordTampa BayTorontoTrinidad & TobagoVancouverVictoriaVirginiaWashington DCWest MichiganWinnipeg
EMEA (32)AustriaBahrainCyprusCzech RepublicEast Africa
EgyptEmiratesFinlandGermanyGreeceHungaryIrelandIsraelIstanbulItalyJordanKazakhstan KuwaitLuxembourgMauritiusNetherlandsNigeriaPolandPortugalQatarRomania
RussiaSaudi Arabia South AfricaSpainUKUkraine
APAC (11)Hong KongIndiaIndonesiaJapanMalaysiaMelbourneNew ZealandPerthPhilippinesSingaporeSydney
PUTTING INVESTORS FIRST MONTH: MAY 2015PARTICIPATING SOCIETIES
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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
FUTURE OF FINANCE TOPIC AREAS
Financial KnowledgeEmpowering investors to make better decisions
Claritas Investment Certificate
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FUTURE OF FINANCE TOPIC AREAS
Retirement SecuritySensible solutions to protect pension systems worldwide
OVER THE NEXT FIVE YEARS, WHAT IS THE MOST UNDERESTIMATED RISK THAT COULD NEGATIVELY IMPACT GLOBAL CAPITAL MARKETS?
0%
10%
20%
30%
40% 34%
20%14% 13%
8% 9%
Source: Global Market Sentiment Survey 2015
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Our Goal: To encourage sound retirement planning based on understanding of key issues.
Example:• Essentials of a More Secure Retirement• Pension Trustee Code of Conduct• Life Annuities: An Optimal Product for
Retirement Income• Online discussion forum on pension
design
FUTURE OF FINANCE TOPIC AREAS
Retirement SecuritySensible solutions to protect pension systems worldwide
ESSENTIALS OF A MORE SECURE RETIREMENT
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Essentials of a More Secure Retirement highlights key principles and practices to help individual investors successfully reach their retirement goals.
Using the tools, planning insights, and suggestions in the document will help investors to:
• Get Started• Keep It Going• Invest Wisely• Retire Well
EVERYBODY HAS A ROLE (IN BUILDING TRUST)
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Professional Organization Industry/ Jurisdiction
Designations and Certifications
New competencies – Investor Ed & Putting clients first
Training and Credentialing
Experience & continuing education
Organizational focus on problem solving
Comprehensive Curriculum (incl. ethics)
Develop ethical foundationDemonstrate integrity
Standards of practice –Asset Manager Code
Continual practice analysis
Communication & educational tools – SIR, PIR
Demonstration of ethical foundation
Ethical Framework/ Codes and Standards
Focus on behavior related attributes
Educate & train all employees
Rebuilding reputation