Crisis of culture

New study highlights a significant gap between perception and practice for ethical behaviour in financial services

A study released by the Economist Intelligence Unit and sponsored by CFA Institute has shown that although financial services executives overwhelmingly recognise the importance of ethical behaviour in the industry, there is still a significant gap between that belief and the industry’s practices. The study, A Crisis of Culture: Valuing Ethics and Knowledge in Financial Services, shows that strengthening culture based around driving integrity and financial knowledge across firms is a priority for the financial services industry.

Despite the importance placed on creating a stronger ethical culture since the financial crisis, a serious disparity still exists when it comes to executives’ recognition that adhering to those higher standards will help earn trust, foster career progress and support financial performance. Although 91 percent of survey respondents placed equal importance on ethical behaviour and financial success, more than half (53 percent) think career progression at their firm would be difficult without being “flexible” on ethical standards, and just 37 percent believe that their firm’s financials would improve if the ethical conduct of employees improved.

The study also looked at the critical issue of knowledge in the industry. Whilst 97 percent of respondents said that they are well qualified for their own role, 62 percent admit that their colleagues know very little about what goes on in departments beyond their own. This shows that a silo culture is pervasive in the industry, with departments acting unilaterally rather than viewing themselves as part of the wider business, suggesting integrated functional and management approaches to risk-proof organisations remains weak.

“CFA Institute sponsored this study in order to take the temperature of the financial services industry as we begin to emerge from the financial crisis. The results show that the industry has further to go on its journey to drive up ethical standards and embrace professional education. It also shows signs of a shift in culture by recognizing the benefits of global ethical standards and industry knowledge, and addressing agency issues,” John Rogers, CFA, president and CEO of CFA Institute, commented.

“If we are to move the industry forward it is incumbent upon everyone within the industry to align their personal and organizational values with those that serve client, shareholder and societal needs. Aspiring to adopt these values will create more resilient firms and a stronger future for finance,” he added.

Carried out in September 2013, the survey polled 382 respondents from Europe (42 percent), Asia-Pacific (34 percent), and North America (20 percent). All respondents are from the financial services industry, with nearly one-fifth (18 percent) representing asset management firms; 16 percent from commercial banks; 15 percent from retail banks; 12 percent from insurance and reinsurance firms; 11 percent from private banks; 11 percent from fund management firms; 9 percent from investment banks; and 8 percent from wealth management firms. One-half are C-suite executives, and the rest are senior executives and managers. 

The EIU also surveyed 50 executives from firms supporting the financial services industry across a number of areas including technology, marketing and business processes.

“Economic growth rates, competitiveness and employment levels in the Middle East region could all be raised further by higher investment in human capital,” Nitin Mehta, CFA, managing director for Europe, Middle East and Africa, at CFA Institute, said.

“Three-fifths of the EIU survey respondents believe that gaps in employees’ knowledge pose a significant risk to their firm. Local investors and investment professionals, understand that a focus on ethical conduct and high quality educational training is required to strengthen the foundations for stronger, sustainable growth. Investment practitioners, their employers and regulators should emphasise that goal to underpin the future prosperity of the region,” he concluded.

Perception v. practice

“Financial services firms are working hard to change the pre-crisis culture. But for change to permeate throughout the firm could take years, if not decades. In fact, since the crisis emerged, there have been a number of scandals in the financial services industry,” the report argued.

“The dilution of bank culture, and the leaching of aggressive investment banking values into more conservative fields such as retail can be traced right back to Big Bang, and wider financial services liberalisation around the world in the 1980s and 1990s,” says Andre Spicer, professor of organisational behaviour at London’s Cass Business School, to EIU interviewers.

The next big concern will be emerging markets, as experts and ratings agencies both have highlighted internal structures problems that could unravel less stable financial institutions in the rapid emerging market sphere.

“Emerging markets were only lightly hit by the banking crisis. Now, however, fears are mounting that Asia, in particular, could face systemic problems as its banks develop and grow more aggressive,” the study notes. EIU highlights an October 2013 Standard & Poor’s (S&P) statement warningthat “a regional banking crisis isn’t out of the question.”

Statistical Highlights:


·  91 percent of financial executives support the notion that aspiring to a globally recognised set of ethical standards would make the financial services industry more resilient

·  67 percent of firms have raised awareness of the importance of ethical conduct by all employees

·  53 percent of financial services executives say strictly adhering to ethical standards inhibits career progression at their firm

Financial Knowledge

·  62 percent of financial executives don’t know what is going on outside their department

·  60 percent of financial executives highlight gaps in employees’ knowledge as a significant risk for their firm

·  59 percent of financial executives agree improving knowledge of the industry as a whole would help make their firm more resilient

·  12 percent say they are confident in their knowledge of the global regulatory environment

About: CFA Institute

CFA Institute is the global association of investment professionals that sets the standard for professional excellence and credentials. The organisation is a champion for ethical behaviour in investment markets and a respected source of knowledge in the global financial community. The end goal: to create an environment where investors’ interests come first, markets function at their best, and economies grow. CFA Institute has more than 116,000 members in 147 countries and territories, including 109,000 CFA charterholders, and 139 member societies. For more information, visit

About The Economist Intelligence Unit

The Economist Intelligence Unit is the world leader in global business intelligence. It is the business-to-business arm of The Economist Group, which publishes The Economist newspaper. As the world's leading provider of country intelligence, the Economist Intelligence Unit helps executives make better business decisions by providing timely, reliable and impartial analysis on worldwide market trends and business strategies. More information about The Economist Intelligence Unit can be found at or follow us on


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