2019 Curriculum CFA Program Level III Portfolio Management and Wealth Planning

Professionalism in Investment Management

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Introduction

The readings covering ethics and professional standards demonstrate that ethical behavior is central to creating trust. Professional behavior is equally important. Professions help maintain trust in an industry by establishing codes and setting standards that put a framework around ethical behavior and technical competence. Professions also set the wider goal of gaining and maintaining the trust of society as a whole. In this regard, professions have a sense of purpose that values society. 

This reading explains attributes of professions and establishes what is expected of an investment management professional.* Professions are growing in size and number, partly as a result of government and regulator encouragement but also owing to demand from clients. Practitioners in some new areas of expertise are also choosing to serve clients within the framework of a profession to protect standards and gain public trust. The concept of professionalism is based on cultural norms, and interpretation of these norms varies by region and country. Such variation is a challenge to defining professionalism globally, but some universal aspects are common to most professions. 

Section 2 of this reading describes professions in general and how they establish trust. Section 3 describes professionalism in investment management. Section 4 addresses expectations of investment management professional, and Section 5 summarizes challenges for investment professionals. A summary of key points concludes the reading. 

*Note that the CFA Program curriculum refers to both "investment management" and "asset management." The terms are generally interchangeable in practice. 

Learning Outcomes

The candidate should be able to:

  1. describe professions and how they establish trust;
  2. explain professionalism in investment management;
  3. describe expectations of and challenges for investment management professionals. 

Summary

  • A profession is an occupational group that has specific education, expert knowledge, and a framework of practice and behavior that underpins community trust, respect, and recognition. 
  • The requirement to uphold high ethical standards is one clear difference between professions and craft guilds or trade bodies. 
  • A primary goal of professions is to establish trust among clients and among society in general.
  • Common characteristics of professions include normalization of practitioner behavior, service to society, client focus, high entry standards, a body of expert knowledge, encouragement and facilitation of continuing education, monitoring of professional conduct, collegiality, recognized overseeing bodies, and encouragement of member engagement. 
  • The investment management profession has become increasingly global, driven by the opening of capital markets, coordination of regulation across borders, and the emergence of technology.
  • Investment management professionals are trusted to draw on a body of formal knowledge and apply that knowledge with care and judgement. In comparison to clients, investment professionals are also expected to have superior financial expertise, technical knowledge, and knowledge of the applicable laws and regulations.
  • As a professional body, CFA Institute gathers knowledge from practicing investment professionals, conducts rigorous examinations, and ensures practitioner involvement in developing its codes and values.
  • Investment management professionals are likely to encounter dilemmas, including those with ethical implications. Professionals should consider carefully how to determine the facts of the issue and assess the implications.
  • The investment management profession faces challenges from several secular forces, including consumerism, regulation, globalization, demographics, and technological innovation.

0.5 CE

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