By William J. Kelly, CAIA, Founder & Managing Member, Educational Alpha LLC
Atlas Shrugged, Humpty Dumpty Was Pushed, and Hippocrates Grieved… two published novels and a working title for a story unfolding in real time.
Hippocrates, unlike the aforementioned characters of Greek mythology and fictional nursery rhymes, was the genuine article. He was a Greek philosopher and physician who became better known as the “father of medicine” as a consequence of his eponymous Hippocratic Oath; 250 simple but powerful words that turned the field of medicine into a profession. A derivative of this original oath is still taken by most medical school graduates, and amongst the embedded standards is one of ethics, including a promise to avoid impropriety and corruption.
Similar ethics standards are found in the curricula and vows of the Members of credentialling bodies such as CAIA Association, CFA Institute and CFP Board. Yet our industry remains a profession-in-waiting, where the outer boundaries of a fiduciary standard are wide and grey, leaving tremendous latitude in how we define and interpret impropriety for the clients we serve.
If we were a profession, would we…
still not have a clear definition of the most basic table-stakes when defining the LP/GP relationship?
still be debating and pausing DOL regulation that would require a best-interest standard for brokers offering advice upon rolling over a retirement account? This is a transaction paying event for the broker, but it could be amongst the most seminal decisions for the underlying client and their portfolio. A suitability standard should not be acceptable.
not express at least a modicum of stated concern when a less than transparent and likely conflicted organization called DOGE is allowed to be judge, jury, and executioner to make the SEC ‘more efficient’?
simply shrug like Atlas when the jurisdiction of the Fifth Circuit Court of Appeals turns into the latest incarnation of Ugland House? Seemingly letter-box organizations such as Alliance for Fair Board Recruitment, National Association of Private Fund Managers, and the Crypto Freedom Alliance of Texas have perhaps become the venue shopping conduits to strike down any regulation that challenges the most commercial interests of our industry.
… or should we always put the client first, especially when no one is watching?
Our industry will never be a profession. Such decisions need to be made in those critical formative years, like we have seen in professions like medicine, public accounting, and law. These are not perfect professions, but they do require advanced degrees, specialized training, continuing education, and rules for professional conduct for anyone representing a client or patient. The closest formative event for our industry was the Buttonwood Agreement some 233 years ago, when a cynical(?) observation would find an agenda that was largely centered around price-fixing arrangements rather than putting the client first. It took another 150 years until the Investment Advisers Act of 1940 came along, which, for the very first time, codified the fiduciary obligations we have to our clients. Unfortunately, just like Elvis, professionalism had already left the building.
None of this should ever be an excuse or a reason to adhere to low, minimally accepted standards of conduct. All of us can and should adhere to a WWCT (What Would the Client Think) culture and standard in everything we do. Let us never forget that it is the clients’ assets under our management, and they come to us seeking professional advice.
When an anthropomorphic egg comes between two Greek gods, one shrugging and the other grieving, expected market norms will crack, and we may not ever be able to put our industry’s version of Humpty Dumpty back together again. We should never allow that to happen under our watch.
Seek education, diversity of both your portfolio and people, and know your risk tolerance. Investing is for the long term.
About the Contributor
William (Bill) J. Kelly, CAIA is the Founder and Managing Member of Educational Alpha, LLC where he writes, podcasts, and speaks on a variety of investment related topics, focused on investor education, transparency, and democratized access to differentiated risk premia. Previously he was CEO of CAIA Association since taking this leadership role in 2014 until his retirement in 2024. Prior to that, Bill was the CEO of Boston Partners, and CFO and COO of The Boston Company Asset Management, a predecessor institutional asset manager. In addition to his current role, Bill is also the Chairman and lead independent director for the Boston Partners Trust Company and serves as an independent director for the Artisan Partners Funds, where he is also Chair of Audit Committee and a designated Audit Committee Financial Expert. He is also currently an Advisory Board Member of the Certified Investment Fund Director Institute within the IOB (Dublin) which strives to bring the highest levels of professionalism and governance to independent fund directors around the world. Bill began his career as an accountant with PwC where he earned his CPA (inactive).
Learn more about CAIA Association and how to become part of a professional network that is shaping the future of investing, by visiting https://caia.org/