Head of CFA Institute says financial professionals face 'existential' challenge

In an unusual display of self-reflection, the head of the CFA Institute called for his group to help restore public trust in financial professionals by being more honest and open. Speaking to more than 1,600 investment professionals at his group's 70th annual conference in Philadelphia, Paul Smith said the investment management industry should do more to earn its fees, be more honest about investment products that could disadvantage investors, hire people who care as about doing good as well as making money, and be open to potentially disruptive technology, according to a transcript of his speech. "The key challenge still remains, how do we answer the question, what is finance for? Is it for us, the professionals? Or is it for the benefit of our clients, the businesses they invest in, and the communities they live and work in?" he asked the audience. (More: Financial advisers do whatever it takes to avoid talking politics with clients) Noting that we are in an era of low growth and low returns, Mr. Smith said that clients are concerned that financial professionals "don't seem to be suffering accordingly." "Margins remain very high. We, therefore, face increasing public skepticism about how much value the investment industry truly provides, and questions about how trustworthy we truly are," he said. He said the industry encourages investors to expect "a leisurely, well-funded retirement. The advertisements are top-heavy with sailboats and tropical vacations." The reality, Mr. Smith noted, is that the average IRA balance for someone in her or his early 50s is just $92,000. "The low average retirement savings rate, plus low investment returns, means many will work years longer than they originally planned. We know it. Most investors do not yet believe it," he said. (More: Why financial advisers need to rethink their strategies now) The investment management business stands at an inflection point, Mr. Smith said. "What happens to us depends on our vision, wisdom and willingness to take action," he said. "It depends on leadership. We have to better prove the very point of our profession."