Interesting report leading to critical thoughts. Don’t you think that it is simply amazing that only 20% of the respondents considered being a “harmful habit” to clients to “measure performance against market-weighted benchmarks versus achieving client goals”?
Wouldn’t such “harmful habit exhibited by investment professionals” actually be a straight violation of the CFA Code of Standards and Professional Conduct rather than just a “harmful habit”? For instance, in Standard I(C), it is written that: “Members and candidates should discuss on a continuous basis the appropriate benchmark to be used for performance evaluations and related fees calculations”. Thus, “achieving client goals” must prevail, if I understand correctly the CFA Code of Standards and Professional Conduct. Furthermore, it is also written that: “Standard I(C) does not require that a benchmark always to be provided in order to comply. Some investment strategies may not lend themselves to displaying an appropriate benchmark because of the complexity or diversity of the investments included”. Thus, wouldn’t “achieving client goals” indeed override any benchmark?
Moreover, wouldn’t the other four alleged “harmful habits exhibited by investment professionals” more likely be a “non recommended practice” rather than a direct, explicit violation of the CFA Code and Standards? Or where does the CFA Code and Standards address the other four topics as being a violation?
Last but not least, if “measuring performance against market-weighted benchmarks versus achieving client goals” might be listed as a harmful habit, then could “harmful habit” be construed to be equivalent to a “violation”? Am I misunderstanding the CFA wording and its enforcement?