Non-consideration of product suitability most common type of unethical behavior in Asia

Jul 30, 2018
China positive on ethical conduct among investment professionals

A new survey from CFA Institute, the association of investment professionals, looking at ethics shows that 41 percent of respondents in the Asia-Pacific region regard the ‘non-consideration of product suitability before selling to or investing for clients’ as the most common form of unethical behavior in the industry today.

Not disclosing conflicts of interests to clients and/or employers follows, with more than 30 percent of responses.  

The Ethics Survey, conducted among investment management professionals in Asia-Pacific, reinforces the efforts of CFA Institute to raise awareness of ethics among investors and within the investment management community.

‘Our findings come at a critical time when trust in the financial industry, particularly in Hong Kong, remains low,’ says Tony Tan, co-head of ethics, standards and professional conduct at CFA Institute, in a statement. ‘While there’s a growing focus on ethics, we urge the investment community to strengthen its commitment to transparency and professionalism.’

Respondents in China feel relatively positive about the current level of ethical and professional conduct among investment professionals, with 39 percent saying their current level is ‘very ethical’. This figure is notably higher than the corresponding response from Australia (29 percent) and the rest of Asia-Pacific (20 percent).

Yet only 44 percent of respondents from China say a firm’s commitment to ethics and professionalism should matter to clients when they are considering awarding a mandate or hiring an adviser, significantly behind Australia (85 percent) and the rest of Asia-Pacific (52 percent).

The biggest obstacles respondents see when dealing with clients are managing conflicts of interest (26 percent) and determining product suitability (26 percent). Independently and objectively providing recommendations trails slightly behind, with 25 percent of responses.

Other key findings include:

Respondents think institutional investors view the investment profession as more trustworthy than retail investors do: 61 percent of respondents say institutional investors would rate the trustworthiness of the investment management profession as very or somewhat high, while only 34 percent of respondents say the same for retail investors.

In general, respondents are fairly positive on the current level of investment professionals’ ethical conduct: 66 percent agree that it is either very ethical or somewhat ethical. Only 1 percent of respondents rate the level of ethical conduct as not ethical at all.

More than a quarter of respondents (27 percent) note that their firm never provides ethics training to employees.

Respondents in China are more likely to agree that their firm advocates their code of ethics compared with the Asia-Pacific region overall (84 percent versus 78 percent).



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