The economic crisis caused by the outbreak of coronavirus is all that the world has ever experienced.
Unlike the recession of the 1980s, the collapse of the 1994 bonds, the currency crisis in Asia or the catastrophic mortgage of 2008, this is not a financial crisis. This is an economic crisis. And although financial crises occur with some regularity, most of them have more localized impact areas.
In this case, almost every major economy in the world was negatively affected by some form of social isolation. The fact that this happened in a strong and growing global economy has turned it into a real systemic shock.
This unprecedented crisis requires financial professionals to become aware of the leading role that we must play in investor management through constant volatility towards calmer shores. More than ever, we need to rely on our experience and knowledge to look beyond the short term and try to balance market activity with the economic reality that supports it. And, as always, strict ethical behavior should remain our top priority.
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In February, global stock markets fell 20-30% per month. The S & P volatility index reached the level that was last observed in 2008, and credit spreads rose sharply.
After nearly a decade of steady decline, US unemployment reached 30 million by the end of April. Governments around the world provided huge amounts of financial assistance, and central banks looked for all the available monetary policy tools to help stop the tide.
The coronavirus pandemic and the authorities’ response to it have seriously affected the markets and financial future of retail investors and pension funds everywhere. A recently published study by the CFA Institute provides a critical look at how financial experts and professionals see the crisis, including recovery, market volatility, government intervention, and the role of ethics in managing assets and finances in times of crisis.
The coronavirus crisis has affected industries differently. To date, investment management has been spared the many destructive factors that other sectors face.
At that time, 54% of the surveyed CFA Institute members said their firms did not change their hiring plans, and 36% said their firm was freezing hiring, and 9% said their firms were being cut. This puts the industry in a better position than the total US workforce: by the end of April, 23% of the US population are applying for unemployment benefits.
Those of us who work in this industry should take this opportunity to build the trust of our customers so that we can be of great help. Trust is built on the basis of understanding and participation.
Careful attention should be paid to understanding the problems and goals of investors, welcoming their influence and providing information so that they are confident in their decisions.
Instead of delivering another blow to our reputation, financial professionals must seize the moment to demonstrate ethics and hope for the industry. We all have a duty to protect our customers from fraud and fraud, from large to seemingly insignificant, that damage not only our reputation, but also individuals and businesses that depend on fair and healthy markets.
For the health of the financial industry and markets around the world, it is imperative that financial professionals comply with the ethical standards established by various associations of financial advisory companies. This ethics will be tested for how the financial industry handles customers and their investments, their own employees, and the security of customer and customer information.
Although the vast majority of our industry is ethical, we understand that difficult times can often lead to disruption. Unfortunately, 45% of respondents believe that a crisis can lead to unethical behavior in the industry. This percentage is even higher in emerging markets. We must not allow this.
Although respondents may vary depending on how much they think regulators should intervene in this crisis, 94% of respondents believe that regulators should focus on informing the public about the risk of fraud.
Meanwhile, 44% of respondents believe that the most important message for investors is that markets function properly and serve their purpose even in times of crisis. In addition, financial professionals are widely associated, with 75% preferring the accountability of corporations receiving emergency funds and agree that they should not pay dividends or bonuses.
The financial advisory industry has the opportunity to show that it will not allow flowering in difficult times. The industry can show that it is aware of the challenges posed by this crisis and will act as a reliable partner in a shared ecosystem committed to equitable global prosperity and security.
Recovery will not be judged by any individual success, but by whether the world has come together for the good of society. Financial advisers can and should be there to help pave the way for investors.