Practical analysis for investment professionals
15 December 2014

Staying off the Slippery Slope: Ethics Advice for Those New to the Industry

If you were asked, “Are you ethical?” I am fairly certain that most readers would answer quickly with a resounding “yes.” After all, most of us were taught right from wrong as children from our parents or some other older, wiser adult.

However, generally knowing right from wrong is not going to prevent you from falling into an ethical trap or making an ethical misstep, or worse, heading down an ethical slippery slope into the pit where those who have harmed clients or broken the law have ultimately landed. This is the case because ethical behavior is influenced by many factors that you may not have considered.

In essence, behaving ethically requires more than knowing right from wrong: it primarily involves keeping an ethical mindset and being aware of potential problems.

Also, consistently making ethical choices can be a bit more challenging when you are entering the competitive, hard-driving world of finance. And ethics matter now more than ever in a world in which those in financial services, rightly or wrongly, carry the mantle of those who came before them. Since the financial crisis, investor trust in the industry is low.

Global surveys conducted by the public relations firm Edelman in the past several years found that consumers rated financial services as the world’s least trusted profession. While a similar 2014 Edelman Trust study, commissioned by CFA Institute, showed that trust in the profession may have increased somewhat, the profession still has a long way to go to rebuild investor trust.  Further, the 2014 survey found that the top actions that build trust in an investment manager relate to behavior over performance.

What is the best way to change or impact the profession? Some would say one person at a time and others would say make sure ethical issues are discussed and focused upon at firms. The bottom line is that each professional has the responsibility to lead the way in this area. Also, acting ethically or doing the right thing is important to individual professional success. If you are new to the industry or are a business school student, you may be primarily focused on sharpening your skills or what type of job you hope to attain, but if you want to have a long career full of mostly positive experiences and no missteps, you need to start thinking about ethics as well.

Through its Future of Finance global initiative, CFA Institute has sought to draw attention to and improve ethical practices in the financial services industry. In keeping with that mission, Donald C. Langevoort, a professor at Georgetown University Law Center, authored “Ethical Mindfulness: A Guide for New Financial Services Professionals,” in which he offers accessible and practical advice on how to focus on ethics and keep an “ethical mindset” as you enter the profession. In addition some of the research cited in the area of behavioral psychology — outlining how people often behave absent making conscious choices — is very thought provoking. While this piece is targeted for the new financial services professional or new CFA charterholder, it has some compelling points to make for anyone in the financial services industry.

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All posts are the opinion of the author. As such, they should not be construed as investment advice, nor do the opinions expressed necessarily reflect the views of CFA Institute or the author’s employer.

Image credit: ©iStockPhoto.com/Meriel Jane Waissman

About the Author(s)
Cheryl L. Evans

Cheryl L. Evans, J.D., LL.M., is a director in Educational Events and Programs at CFA Institute. She has also served on the Future of Finance team and was a senior investigator in the Professional Conduct Program at CFA Institute. Prior to joining CFA Institute, she held various legal positions, including: Senior Counsel at the U.S. Securities and Exchange Commission; Trial Attorney at the U.S. Department of Justice; and Special Assistant U.S. Attorney in the Eastern District of Virginia, handling criminal matters, among others positions. She holds Bachelor of Arts, Juris Doctor, and Master of Laws degrees.

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