Despite a recovery in the capital markets from the massive declines in late 2008 and early 2009, investors remain skeptical, even suspicious, of the investment community.
In Canada alone, the number of complaints against investment and financial advisers has continued to grow over the past few years, as clients question whether their adviser really had their best interests in mind when recommending investments.
Margaret Franklin, CEO of Toronto-based Kinsale Private Wealth, is the new chairwoman of the board of governors of the CFA Institute, a global association of investment professionals that administers the curriculum and exam programs worldwide for the CFA and CIPM designations.
Business in Vancouver spoke with her on her visit to Vancouver last week to discuss some of the biggest challenges facing the investment industry.
The umbrella for everything we’re doing is restoring trust [with investors]. We’re probably at an unparalleled level of distrust of the investment industry, so much of our work this year, and over the next few years, will be to focus on serving the membership and their needs for professional development to restore the trust of clients.
If you think about what makes a professional, it’s their integrity, loyalty to clients, prudence and standard of care and duty. In a rapidly changing environment, much of that involves being very much on top of things, not just with the daily grind-type of information, but on structural issues. We have put a tremendous focus on making sure we allocate the resources necessary so the CFA Institute can be the clearing house of information.
You don’t want a crisis to go to waste, and I think the opportunity for the voice of the CFA Institute is more significant now than it ever has been.
I don’t know of any serious investment professional who didn’t learn many things out of 2007, 2008 and 2009. I don’t think it’s exclusive to 2008; it’s the downfall and rise in the aftermath of it that has investors rightfully rethinking and rebuilding their portfolios.
Investment is a business of managing uncertainty, so you’re never going to perfectly predict everything that happens. But what you can do is apply a framework that has you assessing information and has you structuring portfolios, or just working with clients in a way that navigates through those uncertainties and helps mitigate some of the risk factors.
There are a couple of issues with reform in the U.S. First, it’s being shaped by special interests. Second, in reaction to the crisis, there’s been this great need to act quickly. We would advocate for a multi-constituent, non-partisan discussion, taking the time to have more thoughtful discussion. If rules are done hastily, resulting in collateral damage and unintended consequences where people can figure out ways to get around them, that’s poor regulatory reform.
Our position is you want a rules framework with principles based around it, in application and in enforcement, so you don’t end up with people conducting themselves to the letter of the law but not the spirit of the law.
For most of us in the capital markets, our business is based entirely on trust and reputation and the real challenge for many participants is short-term-ism versus long-term reputation and trust.
Those can come into conflict when the world is quarterly driven.