A strong foundation in ethical principles, together with thorough education and training across the investment space, means CFA charterholders are well placed to fulfil the best interest duty required by financial advisers, according to CFA Societies Australia.

At a time when the conduct of financial advisers is under intense scrutiny, CFA Societies Australia is focusing on improving ethical standards in the financial services industry. This is the motivation behind this week’s first-ever Investor First Week in Australia.

Investor First Week is part of CFA Institute’s global Future of Finance initiative, a long-term effort to shape a trustworthy, forward-thinking financial industry that better serves society. The initiative aims to provide the tools to motivate and empower the world of finance to commit to fairness, improved understanding and personal integrity.

Paula Allen, President of CFA Society of Melbourne, said the best interest duty for financial advisers is a critical step towards building greater confidence and trust among investors in financial professionals.

“Investors need confidence that advisers will not only act with integrity and put their interests first, but that advisers also have the knowledge and skills to provide suitable advice.  In Australia, we saw the introduction of the Future of Financial Advice (FOFA) reforms with a greater emphasis on investor protection and the formation of Best Interest Duty to ensure advice provided is in the best interest of the client.

“CFA Societies Australia is supportive of the introduction of the Best Interest Duty for financial advisers. The duty is consistent with the ideals within the CFA Institute Code of Ethics and Standards of Professional Conduct.

“One key element of the Best Interest Duty is adviser competence, which prescribes the need for advisers to demonstrate they have the expertise in the relevant subject matter on which they are advising, for example, superannuation or investment.

“In order to comply with their obligations, advisers need to consider their professional qualifications and training, as well as their knowledge and skills before providing advice. Appropriate investment education is essential for advisers meeting their legal and professional obligations in the area of investment advice,” Ms Allen said.

Ms Allen said the curriculum of the CFA program provides thorough training and investment education needed by advisers to meet their best interest duty to clients.

“The CFA program is robust and reflects the knowledge and skills required by investment practitioners to meet their legislative and professional duties. The curriculum provides a primary source for investment education in the management of investor portfolios, specifically portfolio construction, behavioural finance and risk profiling, which are all essential competency areas for providing investment advice.

“Moreover, the program entrenches the importance of ethics, which represents between 10 to 15 per cent of the CFA program curriculum depending upon the level,” said Ms Allen.

CFA Program is organised into three levels, each culminating in a six-hour exam. Completing the entire Program is a significant challenge that takes most candidates on average 4 years to complete.

To earn the CFA charter, candidates must complete the CFA program and have four years of qualifying investment work experience.  Candidates must also become members of the CFA Institute, pledging to adhere to the CFA Institute Code of Ethics and Standards of Professional Conduct on an annual basis.

“More than 3,000 investment professionals in Australia will be sitting for the June 2014 CFA exams. On 7 June, candidates worldwide will be a step closer to earning the CFA charter – a commitment to uphold the highest standards of investment practices and to serve investors by always putting their interests first,” Ms Allen said.

“A strong foundation in ethical principles and standards, together with sound education and training are essential for those participating in financial markets and advising clients on their investment and retirement needs,” she said.

The CFA Institute has more than 122,000 members in 145 countries and territories, including over 112,000 CFA charterholders, with almost 2,000 charterholders in Australia.

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CFA Societies Australia will be highlighting the importance of putting investors’ interests first during its upcoming Investor First Week from 12 – 16 May.

Investor First Week is part of CFA Institute’s global Future of Finance initiative, a long-term effort to shape a trustworthy, forward-thinking financial industry that better serves society. The initiative aims to provide the tools to motivate and empower the world of finance to commit to fairness, improved understanding, and personal integrity. Sydney, Melbourne, Perth and Auckland will join more than 50 cities around the world, where CFA societies representing more than 35,000 investment professionals will mark the global initiative during May.

During Investor First Week, CFA Societies Australia will be focusing on several constructive initiatives in the Australian market to improve standards and safeguard investors’ rights, including a code of conduct for asset managers, and a statement of investor rights.

Anthony Serhan, Managing Director, Research Strategy, Asia-Pacific at Morningstar and Vice President of CFA Society of Sydney, said, “Investor First Week is about emphasising that all participants in the financial sector, globally and in Australia, should put investors first – a prerequisite for improving investors’ trust in the financial system.

“More focus on ethical principles and standards is essential across the financial services industry to regain the trust of investors, particularly in the provision of advice.

“At a time when the concepts of best interest and reasonable basis have been hotly debated in the context of the Future of Financial Advice reforms in Australia, Investor First Week highlights the need for the industry as a whole to hold up both of these principles.

“A fully functioning and efficient market is built on trust. Clients rely on advisers, advisers rely on analysts and asset managers and they, in turn, rely on issuers of securities. A lack of confidence in any one area can have a meaningful impact on others. That is why the principles attached to the Future of Finance remain an important backbone of the industry fabric.” Mr Serhan said.

To help launch Investor First Week, Michael Woodford, Former President and CEO of the Olympus Corporation will speak to CFA members and the investment community in Australia next week about the importance of governance and ethical principles.

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