Mis-selling by financial advisers a top ethical issue

Posted by By at 2 April, at 09 : 17 AM Print



An annual global survey of CFA Institute members has found that concerns about mis-selling by financial advisers have increased significantly over the past year in Australia, despite the government’s stated intention to restore public confidence in the finance industry in the aftermath of the Global Financial Crisis.

Almost half (48%) of Australian members responding to the Global Market Sentiment Survey 2014 regard mis-selling as the most serious ethical issue facing the local market in the coming year, rising from 36% last year. The annual survey measured the opinion of 6,561 CFA charterholders and members globally – 1,575 of whom are in the Asia Pacific.

Interestingly, controversial trading practices such as high frequency trading and dark pools raised less apprehension among Australian respondents (12%), although it is the greatest concern for CFA Institute members in the United States. Within Asia, members consider market fraud as the most serious ethical issue facing their local markets.

Globally, the issue of mis-selling is much less of a concern and global respondents also believe its importance in their local markets is decreasing. This is in contrast to Australia where local members believe the issue of mis-selling, such as failing to offer products suitable to an investor’s objectives, has worsened in the past year.

Commenting on the global survey’s Australian findings, Jason Chesters, president of CFA Society Perth, said: “Our Australian members are showing increasing concern that the Future of Financial Advice (FOFA) reforms have yet to address the issue of mis-selling by financial advisers. We acknowledge the government’s desire to reduce red tape but encourage it to implement policy that improves Australians’ access to high quality advice that is in their best interest.”

Respondents worldwide believe that a lack of ethical culture within financial firms is the largest contributor to the lack of trust in the finance industry.

“A strong foundation in ethical principles and standards is essential across the financial services industry to regain the trust of investors, but perhaps no more so than in the provision of advice,” Chesters added.

“CFA Societies Australia is pleased that ASIC is taking steps to improve the quality of advice offered to retail clients by enhancing the minimum training standards required under RG 146.”

To review the complete report and survey results, visit www.cfainstitute.org/gmss.

Highlights of the CFA Institute Global Market Sentiment Survey 2014 are listed below.

Economic outlook

• 63% of CFA Institute members worldwide expect the global economy to expand in 2014.

• 52% of Australian members expect the local economy to expand and 32% expect it to stay roughly the same.

• Worldwide, the three main drivers for global economic expansion are expected to be an increased focus on resolving global debt challenges (32%); growth among emerging economies (26%); and an increased focus on job creation (21%).

Market outlook

• Globally, the US market is expected to provide the best investment opportunity in 2014 (26%), followed by China (10%), predominantly in equities.

Risks to growth

• Concern about weak economic conditions is more widespread in Australia than in any other country. A larger percentage of Australian investment professionals (49%) regard weak economic conditions as the single largest threat to their market next year, compared with 31% globally…

Excerpted from an article originally published in the April/May 2014 issue of Think & Grow Rich Inc. magazine. If you are a subscriber to Think & Grow Rich Inc. magazine, you will receive this article in your April/May 2014 issue of TGR. If you are not a subscriber, click here to subscribe. 

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