IIC14 – Future of Finance – Key Issues Facing the Finance Industry

Speaker: Frederic Lebel, Co-CEO, OFI MGA and Owner HFS S.A. and Member of the Board of Governors, CFA Institute

Moderator: Paul Smith, CFA, MD, APAC, CFA Institute

Written by: Chetan Shah, CFA, Director, IAIP and Senior Portfolio Manager, Religare Invesco AMC

According to the Edelman Trust barometer, the financial services industry is the least trusted industry globally with a score of 46% and banks having score of 49%. Even chemicals and pharmaceutical industries perceived to be hazardous or less compliant of quality standards are better placed with 51% and 57% respectively. Technology and consumer electronics manufacturing industries have the highest scores of 73% and 70%. So what could be the reason for such low level of trust for financial services industry, which has been at the bottom for three consecutive years? Some of the words for the industry which come out of consumers’ mind are corrupt, greedy, crooks, bad, street money etc.

So what could be done to improve and win back the trust of investors and clients? Frederic P. Lebel, CFA, Member of the Board of Governors, CFA Institute very lucidly explained through his presentation what all the people in the investment profession should do and what all CFA Institute is doing through its various projects under Future of Finance (FoF)? The FoF topic areas include 1) putting investors first or acting in the fiduciary capacity to protect investors’ interests, 2) empowering investors with Financial Knowledge to make better decisions, 3) Safeguarding the system, 4) enforcing Regulation to protect investors and preserving capital market integrity, 5) bringing Transparency & Fairness by promoting open and honest financial system and 6) providing Retirement Security through sensible solutions to protect pension systems worldwide.

Citing the results of the Global Market Sentiment Survey 2014, members have pointed out that improving the culture of the organisation by senior executives, adherence to the ethical code, improved compensation practices, clarification on fiduciary responsibilities, increasing staff training & education are the measures to be implemented to win back investors. The Edelman 2013 investor trust study conducted in the developed markets highlights investment managers/advisors acting in client’s best interest as the single most important attribute by the investors while selecting one. Second and third most important attributes were achieving more returns and commitment to ethical conduct. Fees were the last in their list of the parameters while selecting investment manager.

Frederic also pointed to the cost of failure of trust as well. Investors who do not trust the industry are unlikely to save and invest for their future and hence unlikely to achieve their long term financial objectives. This may lead to “savings gaps” which in-turn will lead to longer working lives, lower quality of life and inter-generational stress.

CFA Institute with around 140 societies worldwide and its 120,000 members globally have been a champion of ethics for the last 52 years. On its 50^th anniversary it released list of simple things to be done by investment professionals to win back and restore trust.

–        C G S

PS: To know more about Future of Finance kindly click on the following URL: http://www.cfainstitute.org/learning/future/Pages/index.aspx

 Each of speaker sessions and the panel discussion has been covered separately under IIC14. These include:

• The End of Quantitative Easing, the Outlook for Emerging Markets and the Rupee by Prof. Avinash Persaud
• Corruption of Capitalism: Challenges to Sustainable Growth & Asset Allocations by Richard Duncan
• A Changing Global Energy Landscape – Implications for India by Dr. Fereidun Fesharaki
• Executive Panel Discussion – India Investment Outlook
• The Inaugural Session by Paul Smith,CFA, Jayesh Gandhi, CFA and Dr.Vikram Kuriyan, CFA
• A comprehensive list of photographs could be viewed in the slide show in the note titled: IIC14 – The Road Ahead for India & Emerging Economies