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Ethical standards below par in financial services industry

Dubai: Ethical standards and knowledge base of the financial services industry are far from ideal and it needs to be addressed to improve the quality of service and sustainability of the industry, a cross section of professionals from the industry said in response to a study conducted by the Economist Intelligence Unit sponsored by CFA Institute.

Despite the importance placed on creating a stronger ethical culture since the financial crisis, a serious disparity still exists when it comes to executives’ recognition that adhering to those higher standards will help earn trust, foster career progress and support financial performance.

“The results {of the study} show that the industry has to go further on its journey to drive up ethical standards and embrace professional education,” said John Rogers, CFA, president and CEO of CFA Institute.

Although 91 per cent of survey respondents placed equal importance on ethical behaviour and financial success, more than half (53 per cent) think career progression at their firm would be difficult without being “flexible” on ethical standards, and just 37 per cent believe that their firm’s financials would improve if the ethical conduct of employees improved.

The study also looked at the critical issue of knowledge in the industry. Whilst 97 per cent of respondents said that they are well qualified for their own role, 62 per cent admit that their colleagues know very little about what goes on in departments beyond their own. This shows that there is a silo culture in the industry, with departments acting unilaterally rather than viewing themselves as part of the wider business.

“If we are to move the industry forward it is incumbent upon everyone within the industry to align their personal and organisational values with those that serve client, shareholder and societal needs. Aspiring to adopt these values will create more resilient firms and a stronger future for finance,” said Rogers.

The study based on responses from 382 financial professionals based in Europe (42 per cent), Asia-Pacific (34 per cent) and North America (20 per cent) shows knowledge base of finance professionals is a big challenge with 60 per cent of participants highlighting gaps in employees’ knowledge as a significant risk for their firm.

“Economic growth rates, competitiveness and employment levels in the Middle East region could all be raised further by higher investment in human capital. Three-fifths of the EIU survey respondents believe that gaps in employees’ knowledge pose a significant risk to their firm. Local investors and investment professionals understand that a focus on ethical conduct and high quality educational training is required to strengthen the foundations for stronger, sustainable growth,” said Nitin Mehta, managing director for Europe, Middle East and Africa, at CFA Institute.