Paul Smith
“Our industry is at a crossroads, largely because investors no longer see the value the industry brings to society and only meaningful change can restore that trust.”
These are the words of Paul Smith, President and CEO of the CFA Institute, who yesterday addressed the CFA Australian Investment Conference 2015 on the need for fundamental cultural change in the financial services industry.
“Australia was one of the stand outs in the global financial crisis. Its strong prudential and corporate regulatory regime ensured its financial system remained robust and fared better than most other developed nations during those difficult years following 2007 / 2008.
I commend the Australian Government, regulators and industry for having the foresight to champion such a regime; this has earned you the respect of many of your peers globally.
However, that respect is now at risk and it’s not a market event that’s threatening it. Its industry’s own internal culture; the enemy within. 2007 was a crossroads moment for financial services in many countries; 2015 is that cross roads for Australian financial services.
“Industry reform is a community issue, particularly here in Australia where nearly every person is an investor through mandated superannuation and change must happen if the health of the financial system as a whole is to be maintained,” Mr Smith said.
CFA has a three point action plan to regain investor trust by building a sustainable investment profession. It is designed to ensure its principles are reflected in the way financial services businesses are run by:
- Setting high standards of entry into the profession and demonstrate the highest levels of professionalism
- Creating business models geared towards achieving investor outcomes
- Advocating for regulations that align firms and clients
“We are asking our 147 global members and 120,000 investment professionals worldwide to endorse these principles and work to actively implement them within their businesses.”
Mr Smith went on to say that CFA in Australia and New Zealand had taken these principles a step further by also developing an ethical model in response to the question “where do we want to be as an industry?”
“We call this our ‘ethical map’, a whole-of-enterprise cultural change management process that is a road map to building strong culture based on world class standards of ethics, market integrity and technical excellence.“
“We wanted our industry to be regarded by the community as highly competent guardians of their money and trusted champions for their rights. All investors have a right to expect two things from the industry which serves them: an instilled sense of ethics and market integrity, in other words, compliance; and high standards of technical excellence, or competence.”
“We also wanted to be acknowledged by regulators as a profession whose culture is largely self-governing, serving the best interests of the community. CFA Institute is already regarded as a highly respected source of knowledge in the global financial community and a trusted adviser to governments and regulators around the world on industry issues. Our comprehensive standards and programs have been adopted by industry globally and now is the right opportunity to share these tools in Australia.”
“Last, but not least, we wanted this region to continue to be globally respected as a centre of excellence in financial services practice and talent. We have nearly 2,500 charterholders in Australia, including some of the most reputable members of the financial services industry. We aim to partner with like-minded peers who want to build and sustain a culture in Australia that delivers this future for our local industry.”
“The industry must now work together to bring this best-practice model to life,” Mr Smith said.
In conclusion, Mr Smith said that now is a crucial time for financial services in Australia.
“Culture is the issue; change is the solution and the path before you clear. All that remains is for Australia to choose to stay at the forefront and to protect the very precious reputation it worked so hard to build. Not choosing to change is no longer an option.”
