High ethical standards are important for the investment industry and investment professionals. This is because the industry is built almost entirely on trust. Trust is important in the investment industry for several reasons:
Clients must trust investment professionals to use their specialized skills and knowledge to serve clients and protect client assets. All stakeholders will gain long-term benefits when investment professionals adhere to high ethical standards.
| rodwsi: There are many needs/reasons for high ethical standards in the investment industry - |
1.) The higher the level of trust in the financial system the more people are willing to participate in the financial markets, enabling the flow of capital needed to fund goods, services and infrastructure which benefits society (hospitals, bridges, schools etc.) - In short, ethical behaviour builds trust allowing capital to flow more efficiently between investors and borrowers.
2.) The demand for investment professional will increase as participation in the financial market increases - this will lead to more job opportunities.
3.) The nature of the products provided are intangible therefore trust is key.
4.) Clients are attracted to more ethical firms so this may result in higher levels of success and profitability (for ethical firms). Furthermore, ethical firms may enjoy lower relative costs than unethical firms as regulators are less likely to have cause to initiate costly investments or impose significant fines.
|bent-teeth: The erosion of trust has consequences that can go further than the original issue.|