Practical analysis for investment professionals
07 June 2013

Restoring Trust in Finance: Remember That “It’s Always Someone Else’s Money”

The financial industry today faces a crisis of confidence that threatens its future. Without trust, markets don’t function properly and growth prospects are limited. So what can the financial industry do to change its trajectory? A panel at the 66th CFA Institute Annual Conference in Singapore, moderated by CFA Institute CEO John Rogers, CFA, provided some answers.

Investment professionals must truly believe that client interests come first — and act accordingly. As Mark P. Delaney, CFA, chief investment officer and deputy CEO of the pension fund AustralianSuper stated: “The first thing is that it’s always someone else’s money.” He urged the audience to think about how they look after other people’s money and what goals their clients need to achieve. As an industry, he observed, the investment profession has lost sight of that purpose and replaced it with self-interest.

Fred Hu, chairman of Primavera Capital Group, reinforced this point, saying the most important thing that the finance industry could do to restore trust is to minimize conflicts of interest and pursue high standards of integrity.

Aaron Low, CFA, principal of Lumen Advisors LLC, took this concept one step further, pointing out that a natural consequence of lack of trust is that the cost of due diligence will go up. Similarly, he said, we are seeing small funds get smaller and big funds get bigger; this concentration is a symptom of the underlying trust problem. In turn, this increases systemic risk — and, as Hu said, “Too big to fail is a universal problem; there are no country exceptions.”

Continue reading on the 66th CFA Institute Annual Conference blog

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About the Author(s)
Rebecca Fender, CFA

Rebecca Fender, CFA, leads the Future of Finance initiative, which is the thought leadership platform for CFA Institute. Her group publishes studies to help investment professionals build their careers and serve their clients more effectively. Their paper Investment Professional of the Future was recently awarded Best Investment Industry Paper of 2019 by Savvy Investor. Ms. Fender has testified before the U.S. House Financial Services Committee AI Task Force on the impact of artificial intelligence on investment roles. She speaks regularly at industry events and has been quoted in the Financial Times, Bloomberg, and the New York Times, among others. Prior to joining CFA Institute, Ms. Fender was a vice president at BlackRock working with pension funds and endowments, and she also worked at Cambridge Associates, where she published research about manager selection. She earned her undergraduate degree in economics from Princeton University and holds an MBA from the Darden School at the University of Virginia.

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