Ethics differentiate us: CFA Institute

The certificate one gets upon qualifying as a Chartered Financial Analyst (CFA) is so large that, apparently, only one printer in the world is set up to produce it.

A gigantic diploma befits the outsized level of effort required to become a CFA. Candidates’ knowledge of a 7000-page curriculum is tested in three exams, totalling 18 hours, over three years.

Only about 40 per cent of those who sit the first CFA exam pass it, and while the success rate rises slightly over the next two exams, still only 49 per cent of hopefuls become eligible after their third test.

Such high failure rates give credence to John Rogers, the Invesco veteran who became global president and CEO of the CFA Institute in 2009, when he says he wants to do more than simply grow the number of CFAs.

“We’re a non-profit, mission-driven organisation that wants to make a positive difference to the world,” he says.

Visiting Sydney this month, coincidentally the day after Shawn Richard, of Astarra infamy, pleaded guilty for his part in the Australia’s largest ever superannuation fraud, Rogers stressed the big role that ethics plays in the CFA charter and curriculum.

“There is no other financial services qualification that puts the emphasis on ethics that we do,” Rogers contends. “The MBA program does not have to teach anything about it, and that’s not right.”

Indeed, ‘Ethics and Professional Standards’ is one of seven topic areas in the CFA curriculum, along with quantitative methods, economics, financial reporting and analysis, corporate finance, analysis of investments, and portfolio management and analysis.

However, Rogers admits there is no way that greed, nor its consequent fraud and misrepresentation, can ever be eliminated.

“The best thing we can do is increase the likelihood it will be detected, and that takes a lot of different hands on the oars.”

He said there needed to be more audits, both internal and external, and more incentive for people to “blow the whistle”  on bad behaviour.

“I think there is a big role for self-regulatory organisations in that regard.”

It is still a case of ‘caveat emptor’ for the investor, but the CFA Institute is doing what it can to increase financial literacy, Rogers says.

The CFA societies in many of the 155 countries where the qualification has a presence help to organise the annual CFA Institute Global Research Challenge, which gathers students, investment professionals and public companies for a “real world” competition.

The CFO of a company relevant to a particular CFA society will brief participants in the challenge directly. The participants, usually students in university economics and finance faculties, then prepare an analysis of the company, also drawing on all public information.

The managing director of the CFA Institute’s Asia-Pacific operations, Ashvin Vibhakar, said many students had told him they had learned more from the challenge than from the entirety of their university courses to that point.

Rogers said the CFA qualification had been shedding its “institutional” image over the past few years, with the demand from sophisticated retail investors for better financial advice meaning more financial advisers were now seeking the designation.

As a result, the CFA Institute has in the past few years begun advertising in publications perceived to have a high net worth audience, including The Economist, the Financial Times and The Times of India.