Industry leaders present at CFA Institute Australia Investment Conference last Friday in Melbourne
John Rogers
CFA Institute, the global association of investment professionals, says the world’s financial system is moving towards a new era of ‘fiduciary capitalism’ where large asset owners including Australian pension funds will lead the world towards sustainable long-term objectives and away from potentially damaging short-term profit motives.
John Rogers, President and Chief Executive Officer of CFA Institute, is in Australia this week to speak on key issues facing the future of finance at the CFA Institute Australia Investment Conference being held today at the Park Hyatt Hotel, Melbourne.
Other influential speakers include Dr Philip Lowe, Deputy Governor, Reserve Bank of Australia, and Dr William Poole, Senior Fellow, Cato Institute and former President, Federal Reserve Bank of St Louis, USA. Other Australian and international speakers will discuss the outlook for equities, bonds and unlisted assets in a low-growth world.
Mr Rogers believes the world is on the cusp of a new era of investment behaviour called ‘fiduciary capitalism’, where long-term asset owners globally, or the fiduciaries who represent the interests of pensioners, sovereign entities and endowment 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 Mr Rogers.
“With the top 1000 of these organisations managing in excess of US$25 trillion, or more than the combined GDP of the US, China and Japan, these large asset owners have become a potentially transformational force that could bring fundamental changes, by aligning the interests of the finance industry with those of the investors,” he said.
As an example, 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.”
Earlier this year CFA Institute and a team of financial industry leaders, including the prominent economist and columnist John Kay, launched the Future of Finance initiative, a long-term global effort to shape a trustworthy, forward-thinking financial industry that better serves society. Mr Kay chairs the Future of Finance Advisory Council.
The Future of Finance initiative is focused on six primary topics of interest for all who rely on finance, including putting investors first; safeguarding the system; retirement security; financial knowledge; regulation and enforcement; and transparency and fairness.
Investor First Day
Paul Smith, CFA Institute’s Asia Pacific Managing Director, said CFA Institute was proposing the concept of an ‘Investor First’ day to emphasis that all participants in the financial sector should put the investor first – 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.”
“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 behavior rather than focusing on performance-centric standards.
“Looking into the future, investors expect government to help build trust in capital markets. Our survey found 52 per cent 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, advisors and regulators, to build a more robust and trustworthy financial system,” said Mr Smith.
The recently released CFA Institute & Edelman Investor Trust Study reveals 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 per cent trust investment firms to do what is right. The survey found retail investors are less trusting of the industry (51 per cent) than their institutional counterparts (61 per cent).
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, growing from just 32 thirteen years ago.