Financial Services

Op-ed: Financial professionals need to keep investors safe in these unprecedented times


The economic crisis caused by the coronavirus outbreak is  anything the world has ever experienced.

Unlike the recession in the 1980s, the bond collapse of 1994, the Asian currency crisis or the 2008 subprime mortgage disaster, this is not a financial crisis. It is an economic crisis. And, although financial crises occur with some regularity, most have more localized impact zones.

In this case, almost every major economy in the world has been negatively impacted by some form of societal lockdown. The fact that it came amidst a strong and growing global economy made it nothing short of a seismic systemic shock.

This unprecedented crisis demands that finance professionals recognize the leadership role we need to play in guiding investors through ongoing volatility to calmer shores. More than ever, we need to draw on our expertise and experience to look beyond the short-term and try to balance market activity with the economic reality that underpins it. And, as always, strict ethical conduct must remain our top priority.

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In February, global stock markets dropped 20% to 30% in a month. The S&P’s volatility index reached a level last seen in 2008, and credit spreads rose sharply.

After a near-decade long steady decline, unemployment in the U.S. rocketed to 30 million by the end of April. Governments around the world have provided massive amounts of fiscal aid and central banks have looked for all available monetary policy tools to help stem the tide.

The coronavirus pandemic, and authorities’ responses to it, has severely impacted markets and the financial future of retail investors and pension funds everywhere. A newly published survey conducted by the CFA Institute provides a crucial look at how financial experts and professionals view the crisis, including recovery, market volatility, government intervention and the role of ethics in asset management and finance in times of crisis.

The coronavirus crisis has affected industries differently. Investment management has thus far been spared many of the ravages some other sectors face.

To that point, 54% of those CFA Institute members surveyed said that their firms are making no changes to hiring plans and 36% said their firm is freezing hiring, while 9% say their firms are downsizing. That puts the industry in a better position than the general U.S. workforce, with 23% of the U.S. applying for unemployment benefits by the end of April.

It is incumbent on those of us in this industry to take this occasion to deepen the trust of our clients so we can be of most help. Trust is built on a foundation of understanding and engagement.

Careful attention must be paid to understanding investor concerns and objectives, welcoming their influence, and being forthcoming with information to make them confident in their decisions.

Rather than suffer yet another blow to our reputation, financial professionals must seize the moment for the industry to demonstrate ethics and hope. It is incumbent upon all of us to help guard clients against scams and fraud, from the large to the seemingly insignificant, that harm not only our reputation but individuals and businesses that depend on fair and healthy markets.

The finance industry has an opportunity to show that it will not let impropriety flourish in difficult times.

Steve Horan

managing director of the Americas region for CFA Institute

It is critical for the health of the finance industry, and markets around the globe, that financial professionals live up to the ethics and standards set by the various financial advisory industry associations. Those ethics will be put to the test in how the finance industry handles clients and their investments, their own employees, and the security of client and customer information.

And while the vast majority in our industry act ethically, we are aware that times of hardship can often lead to impropriety. Unfortunately, 45% of respondents think it’s likely that the crisis will lead to unethical behavior within the industry. This percentage is even higher in developing markets. We must not let that happen.

While survey respondents may differ on just how much they think regulators should intervene in this crisis, 94% of those surveyed believe that regulators should focus on educating the public about fraud risk.

Meanwhile, 44% of respondents believed the single most important message for investors is that markets are functioning properly and serving their purpose, even in times of crisis. In addition, financial professionals are widely united, with 75% favoring accountability for corporations receiving emergency funds, and agreeing that they should not pay out dividends or bonuses.

The financial advisory industry has an opportunity to show that it will not let impropriety flourish in difficult times. The industry can show that it is cognizant of the challenges brought about by this crisis and will act as a trusted partner in a shared ecosystem working towards equitable global prosperity and security.

Recovery will not be judged by any individual successes, but by whether or not the world came together to the benefit of society. Financial advisors can and should be there to help lead the way for investors.



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