Financial Reform: CFAs Strike Back

CFA-Chartered Financial Analyst members have taken it on the chin for the past 3-4 years as the markets have tumbled and now gyrate with great volatility.CFA advisors and counsellors, subject to legally binding Fiduciary Trust Limits may well have been some of the babies tossed out with the bad financial waters in the latest down turn. This is notable because  CFA credited Financial Counselors are legally  required to uphold fiduciary trust obligations [“do no harm to the client”] unlike their stock broker colleagues while managing customer portfolios. This difference has allowed stock brokers, for example, to do own account transactions and make “alternative” recommendations that may be more in the interests of their organiza\tion’s latest financial dealings and not necessarily in the best interests of clients. This conflict of interest with their advisories to clients can be readily disguised in volatile and risky markets

But the biggest hit that CFA based counselors have taken is the general pox on the Financial Community prescribed by the  public since the Too Big Too Fail banks brought down the Financial System in 2007-2008. The only real safe haven during that era was cash and FDIC-insured deposits. Even the Goldman Sachs bankers , supposedly the savviest of insider players, got the action wrong. So also for too many stock brokers and CFA Counselors as well.

So the CFA Institute has a good deal of interest in the Financial Reforms before Congress. CFA itself has vigorously reformed its own standards for measuring risk and returns in the market. The CFA has also objected to the fact that in current reform legislation  stock brokers are still exempt from the fiduciary trust obligations they must adhere to though stock brokers often act as proxies   for Financial Advisors when customers make their investments. But perhaps the most telling move has been the release of a survey by the CFA Institute on Congressional Financial Reform. The survey found that 58% of CFA members supported Obama’s Financial Reforms while 26% are opposed [the remainder are neutral] and 67% objected to “little progress” in Congressional Financial Reforms.

Dow Jones Marketwatch picked up on this in the headline story Volcker Rule Dead – Not So Fast. The story noted wryly:

The poll of 1,471 respondents also suggested they’re unhappy with the pace of reform in Washington: 67% said the government had made “little progress” in reforming Wall Street, as opposed to just 24% who said “some progress” had been made, CFA said.

“They want banks to focus on their specialty — taking deposits and making loans,” Jim Allen, CFA Institute’s head of capital markets policy, said in a statement.

The poll may be a warning to Sens. Shelby R-AB , Christopher Dodd, D-CN., and Bob Corker, R-TN, all of whom who have expressed objections to the Financial Reform Plan – and specifically the Volcker Rule plus any requirements that brokers be subject to non-conflict of interest Fiduciary Trust legal requirements….

Just when many of them thought their political lives were safe, along comes zombie reform.

In sum, these Senators seem oblivious to the fact that not only CFAs but voters in general are unhappy with the pace of Financial Reform [this obstructionism may be a deliberate Nope-A-Dope strategy by the Republicans]. Voters, Tea Party-ers, and CFA Financial Counselors may hold them or fellow lawmakers running for reelection accountable. CFA Financial Counsellors, suffering under the general curse on Financial Professionals, may be getting a measure of revenge by helping to revive Financial Reforms that the Banksters are bitterly opposed to.

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