How the CFA can build professional integrity – New Claritas Investment Certificate

16 / 05 / 2013
Category: Blog

City AM published a news article on the CFA and the new Claritas Investment Certificate, to view the article, please visit

Principled investors are cashing in as trust falls

CONSUMER confidence in financial services is lower than ever. YouGov recently found that 70 per cent of the public believe banks are driven by greed, and just seven per cent think they have learnt their lessons from the crisis. In this environment, the ability to gain the confidence of clients, employers and regulators can put you at a premium in the employment market.

But obtaining trust in the modern financial services industry can be elusive, particularly if you are a young professional with no reputation or track record to fall back on.

The CFA Institute – the financial education body behind qualifications like the Chartered Financial Analyst (CFA), the Certificate for Investment Performance Management (CIPM) and the newly-created Claritas investment certificate – claims it has a solution, by imparting a professional and ethical credibility to its students that is recognised by employers, consumers and authorities around the world.

The CFA?Institute draws on over 50 years’ experience teaching the core principles of investment best practice, alongside a diverse and engaged network of alumni. There are over 100,000 charterholders practicing in more than 130 countries globally, and the Institute interacts with them regularly to ensure it is teaching new students the requisite technical abilities to handle client assets effectively.

The difficulty in completing the CFA programme – the course in its entirety takes most candidates two to five years of gruelling study, and requires four years’ relevant work experience – has driven its reputation as the industry standard for investment professionals. Charles Morrison, a hedge-fund focused headhunter at Altus Partners, says that while the Masters in Business Administration (MBA) has become almost a given among top candidates, the CFA continues to hold a gravitas among employers and recruiters.

The curriculum of the CFA programme covers a broad range of skills and practical knowledge needed in today’s investment industry. One day you could be studying corporate governance, the next distressed securities. Charterholders tend to hold technically demanding roles – some 22 per cent worldwide are portfolio managers, 14 per cent are research analysts, and seven per cent chief executives.

But the trustworthy professional in today’s market must be more than just technically able. Craig Donaldson, chief executive of Metro Bank – one of Britain’s fastest growing financial institutions – says that he “hires for attitude and trains for skill”. His hiring strategy is similar to that of many businesses that have thrived as trust levels have dropped.

The CFA Institute also markets itself on the teaching of integrity and ethical standards to its students. Recently, it has renewed its efforts to attract the increasing number of professionals seeking to differentiate themselves in a guarded investment industry.

Last year, the Institute’s mission statement read thus: “To lead the investment profession globally by promoting the highest standards of ethics, education, and professional excellence.” In response to the fall in confidence among consumers and authorities, it has recently added: “for the ultimate benefit of society”.

But what does that mean for you? Clients want to know that the person they are entrusting with their assets can be relied upon to act in their best interest. In the absence of a professional track record, accreditation by the CFA?Institute works as something of a guarantee.

Charterholders are held to a strict code of conduct, binding them to protecting the integrity of the profession, and to maintaining and developing their professional competence. Employers and consumers can reasonably trust a charterholder to act within a defined set of rules, by which they are evaluated annually. Those who breach the code have their conduct reviewed by an independent panel, and are threatened with censorship or even the loss of their chartered status.

Of course, there is a distinction to be made between ethics and regulation. The latter is arguably even more important to a modern financial services business, working hard to ensure it stays on the right side of the law.

Indeed, it may even seem questionable how an ethical commendation by the Institute can differentiate you at all when regulation is stamping out unethical behaviour anyway. A recent study by financial adviser review group VouchedFor found that 97 per cent of independent financial advisers have taken on new clients since the advent of the Retail Distribution Review (RDR), and just 19 per cent had lost a single client. One of the reasons identified was that increased transparency enforced by RDR had boosted clients’ understanding of and trust in their adviser.

But Steve Gazzard, operations director at the Institute of Financial Planning (one of the main backers of the influential Question of Trust campaign), says that, while he certainly supports regulation as part of restoring trust, there are some industries and roles in which ensuring clients’ interests are put first is more difficult to control, and it’s these areas where financial education can help you stand out.

And through continued collaboration with its member societies, the CFA Institute has also been successful in obtaining recognition from regulators across the world, which can have some obvious benefits for your career.

For example, almost all US states provide waivers to CFA charterholders from state licensing exams for investment advisers. In the UK, national member society the CFA Society of the UK runs the Investment Management Certificate (IMC) course, which is used by most leading investment firms to demonstrate regulatory competence.

Partially in response to falling trust levels, the Institute has created the Claritas investment certificate, which aims to provide a basic introduction to finance and the investment industry, targeted at those operating in investment support roles like client services, IT, sales and compliance. The idea is to facilitate a higher level of communication between support staff, front-line investors and clients, reducing errors of miscommunication and providing a more customer-orientated service.

John Bowman, managing director and co-lead of education at the Institute, says that businessmen and women should not underestimate the power of improving communication in the restoration of trust. “One thing we’ve found when piloting the programme is the surprisingly high influence it’s had on changing culture – the effect of the programme has often been to create a more client-orientated business as well as reducing the risks inherent in the industry.”

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