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 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.


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.

Big Ideas: Evolving Trends and Skills on the Minds of Investment Professionals

What is happening to the investment industry? Where are we heading? How can I keep up? And, more often, how can I stay ahead of the curve? I attended more than 100 events for CFA Society Chicago in the last year, and nearly every time I find that small talk between CFA charterholders quickly turns to big ideas such as these.

We’re an analytical group, so it comes as no surprise to me that most of our members already understand that the investment industry is rife with change. Many already feel it in their daily work. And as I move between conversations and events, I know that no professional is more prepared for the future than a charterholder.

Take technology, for example. Blockchain, robo-advisors, high-speed trading, you name it; it’s impossible to deny their growing presence in our industry. These forces, along with the emergence of passive investments and ETFs, have put downward pressure on fees. This is great for investors as they will be able to gain more from their investments. However, these forces also put downward pressure on investment companies’ revenues. This leads to an arms race to collect assets, increase use of collective investments (as individual stock analysis is expensive), and ramp up technological investments.

Technical competence is essential to help investors navigate this rapidly changing environment. Starting in 2019, the CFA program curriculum will contain questions on data mining in order to keep this technical edge sharp. For future years, CFA Institute is even considering artificial intelligence questions. At CFA Society Chicago, we have and continue to explore these topics for professional development sessions that keep our members up to speed.

However, technical competence is not enough. As the needs of investors and the nature of investment practice change, ‘soft skills’ are becoming just as essential. Skillful client communication and presentation, brand building, networking, leadership, and improvisation are often needed to provide maximum value to clients. CFA Society Chicago members have already begun taking advantage of the new soft skill workshop developed by our Professional Development Advisory Group.

Ethics, though, will be the skill that will keep us on the right track. Confidence in our profession can only be built through a commitment to a high standard of ethics and embracing rules that protect the rights of investors. Charterholders already lead this charge. Charterholders are already rigorously trained in ethics and embrace the Statement of Investor Rights as drafted by CFA Institute. Furthermore, CFA Institute is a staunch advocate of a universal fiduciary standard.

Whether technical, “soft,” or ethical, every challenge our members see presents an opportunity to demonstrate their skills to meet them – some new, and some old. It’s just another chance for charterholders to prove their value.

CFA Society Chicago Book Club:

The Green and the Black: The Complete Story of the Shale Revolution, the Fight Over Fracking, and the Future of Energy by Gary Senovitz

GreenBlackOne of the benefits of being a part of the book club is learning about industries, markets, or products that are outside one’s normal course of life.  I know little of the oil and gas industry, having spent most of my life researching and working in the financial service industry.  I would encourage everyone to keep an eye on the Book Club upcoming lists, and choose one or two that would increase your breadth of knowledge and join us for the discussion.

What happens when a self-described New York liberal (the Green) meets an oilman (the Black)?  Or in an interesting twist of fate they are the same person?  Senovitz is a Managing Director of a Private Equity firm (Lime Rock) in New York that specializes in the oil and gas industry, and is also a devout liberal worried about environmental issues and the future effects of climate change.   The end result is a very entertaining and even handed account of hydraulic fracking and a great story of its history and development.

The book begins with the history of hydraulic fracking and with riveting accounts of its biggest pioneers such as Audrey McClendon of Chesapeake Energy, George Mitchell of Mitchell Energy, Mark Papa of EOG Resources  and Harold Hamm of Continental Resources.  The four are described as the Mount Rushmore of the Shale Revolution.  Their stories are a big part of the boom that led to the success of fracking: risk takers always seemingly on the edge of bankruptcy.  They persevered by staying true to their beliefs and their refusal to give up while others scoffed and laughed at them.  Many accomplished their success, simply because they did not know what else to do but continue to try.

The narrative continues to wind through many of the issues surrounding fracking.  The author breaks down the Documentary Gasland as more staged propaganda than facts and leading to an unneeded public hysteria, but also highlights real concerns such as surface contamination and noise which are very damaging and must be properly managed.  Senovitz remains tortured that fracking will lead to more carbon use, but he runs through large amount of statistics to make his case that it is really a natural gas boom that has led to the United States greatly reducing its dependence on coal and lowering its carbon emissions.  Other benefits include creating jobs, reducing American dependency on foreign energy and improving lives globally by spreading cheaper energy worldwide.

The author also describes the ongoing battle between the Yes in My Backyard (YIMBY) vs. the Not in My Backyard (NIMBY) factions.  States like New York and California (NIMBYs) have no problem utilizing massive amounts of the energy from states like North Dakota and Pennsylvania (YIMBYs), but refuse to let fracking on their home turf.  This visible hypocrisy is well discussed, and the author leaves no doubt that the NIMBY’s arguments are more political than sensible economic or scientific positions.

We found the book to be quick paced, and enjoyable.  The narrative provides a wealth of information that is important for all to consider on this controversial activity.  The Green and the Black is one of those special books which keep many of us returning to the book club.  Please join us in the future; we believe you will not regret the time.

CFA Society Chicago Book Club:

Rise of the Robots: Technology and the Threat of a Jobless Future by Martin Ford

Martin Ford, a software engineer by trade, projects a veryrise-of-the-robots-side bleak future for the working prospects of humanity.  In a world that sees its share of apocalypse futures through Hollywood movies and TV shows, one can easily dismiss the premise of his book as another alarmist tale.  However, as the reader pushes through the seemingly endless examples of worker displacement in global commerce, it starts to sink in that maybe we are in for a rough time.  With the arrival of self-driving cars, automated tellers, digitalized customer service machines, 3-D printers, computer written news articles, drone delivery systems, and robotic assembly lines one starts to wonder if there is anything that cannot be automated.  Even in our own industry robo-advisors and computer trading systems are burgeoning industries.

The cause of all this technological advancement, in Mr. Ford’s view, has been the shortsightedness of capitalists driven by extending their bottom line by cutting expenses, increasing productivity and demanding less expensive labor.  After all, in a demand driven economy what happens if there is no demand as individuals find themselves short on the resources needed to buy the goods produced?  This new economy is driving inequality and it will only continue to get worse.  Education has been no panacea as graduates find themselves prepared for a world in which their skills are no longer required.  The top will continue to grow and the masses will be left to fend for themselves.

The reality is that policy makers and regulators are woefully behind the curve, and given today’s dysfunctional governments, why would anything change.  His solution is for an immediate $10,000 minimum guaranteed income for all.  How that is the magic number is lacking in derivation, but he defends the concept in order to keep the demand engine going in a jobless future.  He highlights a large array of taxes to pay for this transfer of wealth (carbon tax, VAT, wealth tax, technology tax, etc.), and defends the transfer to face the oncoming scenario where a majority of the population is not working.    Although the large majority of the change is out in the future, say 2050, we need to start now to ease the transition, and give the policy makers time to adjust the income guarantee and tax structure in the future.

At the club’s meeting we shared our ideas of this potential new world.   We felt that the book was a bit short on detailed specifics, as Charterholders who crave detailed data generally are when faced with a conceptual thesis.   But overall we felt the time spent was very enlightening.

First we talked about the time frame, mostly agreeing that it usually takes much longer than experts, like Mr. Ford, initially foresee.   However, we had difficulty denying that in the far future his reality of limited workers (those to keep the technology running) would not come to fruition.   We discussed changes in our industry that were examples of technological change.  The group contemplated and had big discussions on how does society, and namely democracy, work when the vast majority of voters are not productive.   In a short term practical discussion, we talked on how to position investments to take advantage of the changing world.

This was the second book we embarked upon looking at the future of technology this year (the other being Second Machine Age: Work, Progress, and Prosperity in a Time of Brilliant Technologies written by Erik Brynjolfsson and Andrew McAfee – see previous blog), and each highlighted that the world was changing very fast and society needs to start addressing the changes.  We all agreed these are very important challenges and would recommend everyone to read one or the other to get a sense of the dynamics that are changing our world.

Upcoming Schedule:

January 19, 2016: The Entrepreneurial State: Debunking Public Vs. Private Sector Myths by Mariana Mazzucato

February 16, 2016: The Age of Cryptocurrency: How Bitcoin and Digital Money are Challenging the Global Economic Order by Paul Vigna and Michael J. Casey

March 15, 2016: Pension Finance: Putting the Risks and Costs of Defined Benefit Plans Back Under Your Control by Barton Waring

To sign up for a future book club event, please click here:


CFA Society Chicago Book Club:

SUPERPOWER: Three Choices for America’s Role in the World by Ian Bremmer

In a recent talk Ian Bremmer explained why he wrote this book now, an endeavor he had not contemplated in prior years stating “I think it is extremely important for all Americans to discuss our country’s role in the world, its choices, and make it a large part of the upcoming election.”    Bremmer feels that the United States is at a crossroads in its foreign policy, wandering between multiple ideologies which has weakened its position and left our allies and foes wondering what, if any commitments the USA is prepared to support.  As a guide Bremmer offers our future President three choices: Indispensable America, Money America and Independent America.  Each is expanded upon and discussed in the main body of the book after a brief synopsis of the current and recent history of the world’s foreign relations and America’s involvement.

Bremmer begins by giving a general outline of questions for the reader to consider as one weighs the three options and includes the topics: Freedom is? America is? China is? America’s biggest problem in the Middle East is? What are the USA’s spy capabilities? What are the risks? What is the primary responsibility of the president? What should America look like in 2050?  He uses this outline to help readers shape their own views and then benchmark those views against his three options described below:

  • Indispensable America: “Argues that only America can define the values on which global stability increasingly depends.  In today’s interdependent, hyperconnected world, a turn inward would undermine America’s own security and prosperity.  We will never live in a stable world while others are denied their most basic freedoms – from China to Russia to the Middle East and beyond.”  Since America is the only country that is capable of utilizing its vast resources to underwrite global security and support a general prosperity, it is our duty to help all democratic minded people who support human rights through military campaigns globally.  It is through our defense of our values that we can accomplish a peaceful world, and any retreat would subject millions (if not billions) of individuals to pain and suffering under the hands of maniacal dictators and cultures bent on domination and control.  It is America’s duty to free the world, and we as a nation must not only project strength but use our strength as needed.  This option calls for an expansion of military and economic aid throughout the world.  Pulling back fails to recognize the interconnectedness of the world, and America’s need for a stable world for economic growth.
  • Moneyball America:  This option “acknowledges that Washington cannot meet every international challenge.  With clear-eyed assessment of USA strengths and limitations, we must look beyond empty arguments over exceptionalism and American values.  The priorities must be to focus on opportunities and to defend U.S. interests where they are threatened.”  This option states that the U.S cannot be everywhere and do everything globally.  The next president will have to weigh each challenge, doing a cost benefit analysis on America’s role and decide which areas are worth America’s involvement and which are situations where the U.S. is simply overspending for the return received by both America and the world.  In order to do this correctly, a well thought out and consistent message and action plan must be accomplished.  If the U.S. is not clear when it will get involved and when it will not, the world will be left in confusion as to our intentions and commitments.
  • Independent America: This option “asserts that it is time for America to declare independence from the responsibility to solve other people’s problems.  Instead, Americans should lead by example – in part by investing in the country’s vast untapped potential.”  This argument is based on the belief that America’s history of foreign involvement recently has not benefited the world, and has left our own country in decay.  This option allows for a massive decrease in military and foreign aid that should be invested in America through: rebuilding our public infrastructure, investing in American education, increasing our care to our brave veterans, decreasing taxes, and getting our own financial position under control.  Bremmer recognizes this cannot be done immediately, but should be done gradually so as our allies can prepare their own defenses to face future challenges.  The next president should send a clear message that we are going independent and that the world will need to take a much bigger role in helping the oppressed and realize the U.S. is not going to be the policeman of the world into the future.

Bremmer leads the reader through the three choices, and offers a fourth which is “Question Mark America” which he totally dismisses.  This is the America which we are, going back and forth between the three options mattering on political polls and global sentiment.  He openly criticizes our current and near history policies, and calls for a clear solution and hopes that all Americans will force the presidential candidates to be coherent and specific on their foreign policy in the upcoming election.

The author does choose an option and defends his position – we will not disclose the final chapters so as not to spoil the ending.  However the strength of the book is not Bremmer’s own conclusion but that it is well constructed for all readers to really contemplate the current policy, the options and reach one’s own conclusion.  Many members began with one view but were slowly swayed one way or the other as they read this thoughtful treatise, remarking that the book contained many compelling and thought provoking ideas.

As a group we felt the book was an accurate snapshot of world events, and provided an excellent event synthesis on recent historical events.   Although a few indicated they began as a supporter of Indispensable America, after reading the arguments however, the group mainly felt the rest of the world needed to provide further global support and the U.S. was carrying too much of the burden.  In general it was felt that the world needed to step up their involvement in global policies and they needed to be more independent in their own defense structures.  We discussed in detail what we felt were the three major “hotspots” of the world namely the Middle East, Korean Peninsular and Eastern Europe.  Although we concluded it was impossible to serve as policeman to the entire world, the group in general thought it would be too dangerous to completely remove our commitments to these three areas.  Thus, the group in general thought Moneyball was the ultimate solution, although many agreed that the U.S. was not very good at deciding on the fly which was the best time and place for engagement.  In order for Moneyball to work a deep discussion is needed by our political structure to set up clear and decisive guidelines so our allies are fully aware of our intentions.  We also recognized the limitations to this strategy given the changing and dysfunctional environment in Washington at the present time.

There was also support for Independent America, given a long lead time for our Allies to “step up” their capabilities, but most thought the world would become too dangerous if we pulled back entirely and the ultimate result would provide a greater instability to world economic and political order.  We also discussed the fact that there may be alternatives to these three options including the idea presented to pull back but give implicit assumption guarantees to several of our allies in the crossfire such as South Korea, Baltic States and Israel.  Many also felt that pulling back was a hard decision when so many are suffering; can America sit by while many die to ruthless, uncivilized factions?  Simply withdrawing may be too repugnant for many, but who is willing to send their sons and daughters to sacrifice for these countries?  The question is difficult and the answer more so, but these are the thoughts of the reader who chooses to engage in Ian Bremmer’s world.

Lastly, it was noted that one entity was glaringly omitted from the book (although one brief mention did occur but was minor) – the United Nations.


Upcoming Schedule:


September 15, 2015: The New Cold War? Religious Nationalism Confronts the Secular State by Mark Juergensmeyer

October 20, 2015: The Second Machine Age: Work, Progress, and Prosperity in a Time of Brilliant Technologies by Erik Brynjolfsson and Andrew McAfee

November 17, 2015: No Ordinary Disruption: The Four Global Forces Breaking All the Trends by Richard Dobbs, James Manyika, Jonathan Woetzel

December 15, 2015: TBD



To sign up for a future book club event, please click here: