The image of the global financial services industry’s ethical culture is far from squeaky clean, according to two recent reports from the Virginia-based Chartered Financial Analysts Institute (CFA Institute). But there are signs of improvement.

In one survey, A Crisis of Culture: Valuing Ethics and Knowledge in Financial Services, released last November, the overwhelming majority of respondents (91%) said ethical conduct is just as important as financial success at their firm.

Yet, there seems to be a yawning disconnection when it comes to ethics and profits: only 37% of respondents think their firm’s bottom line would improve as a result of higher ethical conduct by employees.

Perhaps even more revealing, says John Bowman, CFA, managing director and co-leader of education with the CFA Institute in London, U.K., 53% said that any career advancement in the financial services sector required being “flexible” regarding ethical standards. For example, some investment professionals believe they sometimes need to “cut corners” or put their own interests ahead of their clients interests in order to be successful at work.

There have been signs of improvement since the global financial crisis of 2008-09, says Bowman, a crisis that helped to motivate the sector to make changes in how clients are treated. However, this shift may be too slow for some CFA members, which helps to explain their pessimistic response.

John De Goey, vice president and associate portfolio manager with Burgeonvest Bick Securities Ltd. in Toronto, says that he also sees this “flexible” attitude about ethics, whether the issue is compensation or conflicts of interest.

However, Julie Littlechild, president of Advisor Impact Inc. in Toronto, is more skeptical about the CFA survey’s results. She suggests there isn’t necessarily a “crisis in culture” within the sector: “I just never met an executive who said people should be flexible when it comes to ethics.”

Instead, she adds, the frustration advisors and executives may feel regarding ethics arises from their efforts to fulfil the principles of regulation while struggling with overly complex rules.

Another survey conducted by the CFA Institute, 2014 Global Market Sentiment Survey (GMSS) was released last December. That survey also found that CFA Institute members have serious doubts about ethics with the financial services industry. Indeed, the majority of respondents to that survey (54%) said that the poor quality of the ethical culture in the industry is the main reason that the public views the industry with distrust.

(The GMSS results came from an online survey of more than 6,000 CFA Institute members around the world, conducted between Oct. 2 and Oct. 17, 2013. Findings for the institute’s ethics report, on the other hand, came from surveys conducted in September 2013 among 382 financial services executives, 50 executives from firms that support the financial services industry and from 15 in-depth interviews with senior financial executives and experts. Of those respondents, 8% came from Canada.)

Even though the industry continues to struggle with perceptions about its ethics, both Bowman and De Goey believe that the industry is changing for the better, albeit very slowly.

“It’s been an evolutionary thing, and it’s an extremely slow evolution,” says De Goey, “like mind-numbingly, paint drying, grass growing slow.” The general trend toward a higher ethical standard, in De Goey’s view, is due to external factors: greater consumer awareness and regulatory changes.

Change would come more quickly, according to De Goey, if the regulators stepped in more forcefully. For example, De Goey says, banning embedded trailer fees and creating a statutory fiduciary duty for advisors would be “quantum leaps” toward improving the ethical culture of the financial advisory industry.

The CFA Institute also views regulation as important to change, says Bowman – but even more crucial are effective leaders guided by a strong “moral compass.”

Another way to enforce a strong ethical culture, according to Bowman, is through codes of conduct, such as the CFA Institute’s Asset Manager Code of Professional Conduct, as well as re-evaluating compensation models in the industry and better training for all employees when it comes to their roles within the corporation and how their organization works within the industry.

But for Littlechild, a successful culture of ethics isn’t about making sure that forms are filled out in triplicate. More depends on how the advisor interacts with clients. She adds that it’s key for ethical direction to be set by the firm’s leadership, which should work closely with employees.

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