Source of the picture: http://moneyplant555.com/code-of-ethics.html
“Last year will remain the weakest year in the world’s financial markets since the financial crisis of 2008. Performance of major stock exchanges ended up in declines and yield differences in bond markets (between government and corporate bonds) created difficulties for those who invested in corporate bonds”. (Source: SEB investments review).
Recessions, crises, ups and downs – these are normal parts of the economic cycle. Financial advisors are the interface between the economy and the customer, and their role is to build customer trust in the financial industry.
A great advisor acts as an intermediary, passing the market information to customers at all times whether the information be good or bad. The stakes are high and besides professional and product knowledge, professionalism is measured with continuous improvement and ethical behaviour.
Stressing ethical behaviour and codes of conduct are the reasons why BFAA license candidates accept the BFAA Code of Ethics as binding when starting to prepare for licensing exams.
Here is a practical example from “Investment Ethics”, by Sarah Peck:
“In dealing with customers you have an obligation to make sure that they understand the transaction. Not all investors have the same level of financial sophistication.
For example, suppose that to inform a client about the relative risk of an investment, you decide to report the investment`s beta (its market risk) among other statistical measures of risk. If this investor is a private wealth advisor, you can be pretty sure that this client understands what beta means and can effectively use it in deciding whether the risk of the investment is appropriate for his or her needs.
Now suppose your client is an artist who has recently become both wealthy and famous. Is reporting the beta sufficient to ensure this investor understands the risk of investment? If the artist directs you to invest all of his or her money in the investment with highest historical return, are you off the hook? No. Clearly you have an ethical obligation to ensure that you understand the artist`s investment goals and can translate them into investments.”
This example shows how development of a professional competency is in tight connection with ethics. Deep understanding of the sector together with knowledge about regulations and, most importantly – knowing and understanding your customer – is actually the backbone of professional ethics.
The BFAA was founded in a response to the upcoming MIFID II regulation. Today we provide a service that ensures that the standards of competency and ethical behaviour are properly proven according to both regulations: MIFID II and the IDD.
As of today, the BFAA has 2687 license holders and our community is increasing fast.
We invite our license holders to learn as much as they can to develop their customers and share their knowledge to aid a personal and professional progress. The BFAA continues to develop its services to help them grow.
Written by Diana Kvedere, BFAA representative in Latvia