Question

Current regulatory environment: Contemplate the responsibilities of today's wealth manager. What licenses and designations are required to be able to advise in an ethical and meaningful way? Within this discussion, tie in fiduciary aspects, such as roles and responsibilities. Consider how CFP (CFA, Series 7) ties into this discussion. Lastly, what are the steps a wealth manager should take to ensure ethical and responsible behavior?

Answer 1

The Series 7 exam is managed by FINRA. The four main job functions include the following:

• Function 1: Seeks business for the broker-dealer through customers and potential customers
• Function 2: Opens accounts after obtaining and evaluating customers’ financial profile and investment objectives
• Function 3: Provides customers with information about investments, make suitable recommendations, transfers assets, and maintains appropriate records
• Function 4: Obtains and verifies customers’ purchase and sales instructions and agreements; processes, completes, and confirms transactions

A CFA is considered to be one of the most specialized investment analysis certifications in the financial industry. A CFA can significantly help an individual’s career advancement, primarily in the areas of:

• Investment management
• Portfolio analysis
• Buy-side trading
• Sell-side research analysis
• Investment banking
• Academia
• Economics
• Financial advising

fiduciary duties of a wealth manager include:

• Suitable advice
• Full disclosure of material facts and potential conflicts of interest (such that the client has complete and honest disclosure to make an informed decision about services of the Adviser and investment recommendations)
• Utmost and exclusive loyalty and good faith
• Best execution of transactions
• The Adviser’s reasonable care to avoid ever misleading clients
• Only acting in the best interests of clients
• Code of Ethics and Professional Responsibility established by the Certified Financial Planner Board of Standards:
• Principle 1 – Integrity: Provide professional services with integrity.
• Integrity demands honesty and candor which must not be subordinated to personal gain and advantage. Certificants are placed in positions of trust by clients, and the ultimate source of that trust is the certificant’s integrity. Allowance can be made for innocent errors and legitimate differences of opinion, but integrity cannot co-exist with deceit or subordination of one’s principles.
• Principle 2 – Objectivity: Provide professional services objectively.
• Objectivity requires intellectual honesty and impartiality. Regardless of the particular service rendered or the capacity in which a certificate functions, certificants should protect the integrity of their work, maintain objectivity and avoid subordination of their judgment.
• Principle 3 – Competence: Maintain the knowledge and skill necessary to provide professional services competently.
• Competence means attaining and maintaining an adequate level of knowledge and skill, and application of that knowledge and skill in providing services to clients. Competence also includes the wisdom to recognize the limitations of that knowledge and when consultation with other professionals is appropriate or referral to other professionals necessary. Certificants make a continuing commitment to learning and professional improvement.
• Principle 4 – Fairness: Be fair and reasonable in all professional relationships. Disclose conflicts of interest.
• Fairness requires impartiality, intellectual honesty, and disclosure of material conflicts of interest. It involves a subordination of one’s feelings, prejudices, and desires to achieve a proper balance of conflicting interests. Fairness is treating others in the same fashion that you would want to be treated.
• Principle 5 – Confidentiality: Protect the confidentiality of all client information.
• Confidentiality means ensuring that information is accessible only to those authorized to have access. A relationship of trust and confidence with the client can only be built upon the understanding that the client’s information will remain confidential.
• Principle 6 – Professionalism: Act in a manner that demonstrates exemplary professional conduct.
• Professionalism requires behaving with dignity and courtesy to clients, fellow professionals, and others in business-related activities. Certificants cooperate with fellow certificants to enhance and maintain the profession’s public image and improve the quality of services.
• Principle 7 – Diligence: Provide professional services diligently.
• Diligence is the provision of services in a reasonably prompt and thorough manner, including the proper planning for, and supervision of, the rendering of professional services.