As a registered investment adviser with over 20 years of financial services experience working with qualified plans and high-net-worth individuals, I am concerned about the current and future ethical state of our industry.
We have been too lenient about the instruction and training of ethics in our industry and have allowed excessive personal and corporate greed to infect our profession, and we are now paying for it. If the attorney general of New York had not come along someone else would have and, frankly, someone needed to.
We should not, however, just pay the fines and move on. We need to address the core of these issues much more seriously than by simply writing checks.
How to become a more ethics-aware industry? I suggest we start at the beginning with our professional training programs such as the CFA, CFP and securities licensing. Before this crisis, I had not thought about the fact that you can become a professional in the financial services industry without understanding the ethical code of our industry. In other words, you can become a CFA or CFP and get your securities licenses without getting one question right about our industry ethics. The exams might have ethics questions in them, but you can still get them all wrong and pass the exam. You can be a quantitative analysis genius and morally lacking and still obtain the financial services industry's most prestigious professional designations.
We have been so concerned about financial services professionals knowing statistics, portfolio management, puts and calls, and arcane financial strategies that we forgot to make sure they know they should never steal money from their clients. In an industry that is supposed to be built on trust, what is more important: ethics or profits?
We need to call for all professionals in our industry to pass either a stand-alone ethics exam for each professional license or charter they receive or to get a passing majority of all ethics-related questions inside the exam, with a less than passing grade on just the ethics questions causing a denial of the license or charter. Simply put, unless you can prove to the licensing or chartering organization that you can obtain a passing score on an ethics questions you will not obtain our professional license or charter. Period.
I call on the CFA Institute, Certified Financial Planner Board of Standards Inc., NASD securities licensing and all other credentialing organizations to begin to make this very important contribution to the ethical standards of our industry. We, as well as our clients, will all benefit from a more ethical financial services industry.
Evergreen Capital Management Inc.