Why do Ethics and Standards Matter?

Adding “CFA” next to your name is more than a sign that you passed three rigorous exams. It’s also a sign of an ongoing commitment to high standards and ethics – a benchmark for investment professionals around the globe, regardless of job title, cultural differences, or local laws.

But when we speak of the importance of “ethics and standards” as a whole, we sometimes gloss over what each half of that equation really encompasses – and, more importantly, why each is important for our profession.

Ethics

Ethics are the basic principles that guide how we choose to act. They are how we can talk about “right” vs. “wrong” so that we can choose “right” and point out “wrong” when we see it.

If a doctor fails to “Do No Harm,” he loses his medical license; in a sense, an unethical doctor isn’t a doctor at all.

In the same way, CFA charterholders found to be in violation of our ethical code are sanctioned and revoke their right to use the CFA designation. It’s hard to argue with the ethical guidelines that CFA Institute has laid out for our profession:

  • Place the integrity of the profession and the interests of clients above your own interests
  • Act with integrity, competence, and respect
  • Maintain and develop your professional competence

We all know the shadow that bad actors can cast on our industry, so having a hard line differentiating them from real professionals is important for maintaining trust in our profession.

Standards

If ethics are the values behind right vs. wrong, standards are how we define specifically what ethical professional conduct looks like. They’re a more concrete guide for our industry and the current moment in time.

While not universal for everyone in the investment industry, CFA Institute believes standards should center on transparency and putting the investor first. After all, that’s what finance is for: the benefit of clients, and the businesses and communities they invest in.

In the Code and Standards, CFA Institute defines duties that professionals have to the investment profession, capital markets, clients, and employers. There are also specific standards about diligent investment analysis, disclosing conflicts of interest, adhering to duties of loyalty, prudence and care, and addressing the suitability of investments and confidentiality.

It is important to lead by example. But our own actions won’t change the public’s perception. Guided by our strong ethical foundation, we can call for higher standards across our industry. It’s why we at CFA Society Chicago will offer free ethics training to Chicago-area pension plans, and it’s why CFA Institute calls for all who call themselves “advisers” to be held to a true fiduciary standard.

As charterholders, it’s our duty – each and every day, in every interaction – to take the high road. In today’s world of mistrust in our industry and salesmen masquerading as fiduciary advisors, adding the letters CFA after your name are more valuable than ever.

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