Lance Gunkel, CFP®, CFA, Managing Director
April 29, 2015
The theme of this year’s CFA Annual Conference is “Future Finance.” The intent is for us to examine not only future prospects in the investment markets, but also – and more importantly – the future of the profession itself.
The last decade is fraught with scandal in the finance industry. Perhaps Bernie Madoff is the poster child for his pyramid scheme that imploded in 2008. We can also see a the problem in a more endemic way through the acts of financial institutions during the credit crisis as these institutions created derivative investment tied to bad mortgages, which then imploded in a major way.
Today I read this article in the New York Times that outlines an even more modern version of fraud called spoofing. In this case a trader submits false sell orders in the futures market so other investors see the selling pressure and believe the market will fall. The spoofer then buys the reduced price futures contracts, removes his sell orders, and profits when the market moves back up to its true market price.
This is not the future of finance. The industry cannot continue in this way and gain the trust of the community. The vast majority of investment professionals take seriously their role as fiduciary to their clients – putting the clients’ interests ahead of their own and doing what is right for those clients.
The way forward is to do this one client at a time, giving that client your best thinking based upon prudent research and in an effort to meet the clients’ goals, objectives, and tolerance for risk. This is the future of finance – working only for you, our client. The success of the finance profession relies upon it, and it is the way in which we should be judged.