Celebrating Gandhiji's Principles: Integrity is the Fabric of the Investment Community Saturday, Mar 02, 2019
A society that is built on a foundation of integrity and honesty is more likely to flourish than one which is built on deceit and fear. Human beings are meant to interact with each other. They socialise with each other, they do business with each other and they work with each other. Governing all of these interactions is a code of ethics and a trust that each person will have the integrity to uphold this code of ethics. Gandhiji held integrity and transparency in the highest of regard. A mother once came to Gandhiji complaining that her son ate too much sugar and asked him to say or do something to inspire the child to give up the substance. She felt that her son would listen to Gandhiji as the child idolised him. The pair waited while Gandhiji looked at the mother and then simply said, "Come back in two weeks." When they returned, Gandhiji spoke directly to the child. "Boy, you should not eat sugar. It is bad for your health." The mother asked why he had not said that two weeks ago. Gandhiji smiled and then said, "Mother, two weeks ago I was still eating sugar myself." Gandhiji believed so much in integrity that he would not counsel anything he did not do himself. It is time for the investment management industry to "walk the talk" of integrity as well. .
The Fabric of the Investment Community
When it comes to the financial services industry, especially the investment management industry, a lot depends on trust and integrity of the financial institutions and wealth managers. The financial industry is at the centre of the economy and acts as a conduit between savers and consumers of money. It is the common thread that ties together all facets of the economy and has a significant socio-economic impact. It is for this very reason that all stakeholders in the industry should uphold the integrity of their values. A large part of the financial markets is based on trust. Trust that both or all parties involved will honour their part in their agreement. Trust that the investment manager will disclose all important information. Trust that all investment decisions will be taken in the best interest of the investors and will adhere to the investment mandate. It is really this trust that holds the financial industry together.
Integrity is the investment that will reap long-term returns
Financial firms should choose to prioritise consistent growth and stability over big-ticket trends and volatility - and return honesty and integrity to investing. Firms should avoid short-term and fleeting gains in favour of long-term relationships. If you intend to be around for decades and intend to build your relationships to last several decades, then you would need to be able to weather multiple downturns, not just ride the upturn. To achieve this, you should adopt honesty and integrity in all your dealings. A long-lasting relationship is built and strengthened on trust. Trust between you and your customers, your regulators and your competition. Firms should aim to become trusted partners of their investors rather than just third-party advisers. Integrity is like the equity that you can bank upon.
In that regard, the mutual fund industry has made great strides in offering solace to its stakeholders. Since all mutual funds are required to register with the Securities and Exchange Board of India (SEBI), they are obliged to adhere to strict regulations, designed to protect investor interest. Interestingly, the regulatory body also consistently keeps reviewing these regulations to ensure that the policies that are being put forth are in the best interest of the investors. Additionally, a periodic review and reporting system ensures maximum transparency by the fund house which in turn assists investors in making informed decisions about their investments. However, at the end of the day, integrity needs to be in the DNA of the institution. It is only then that the financial services industry and all its stakeholders will flourish.
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