The financial services industry has paid plenty of lip service to the importance of ethical conduct in the aftermath of the economic crisis. But a majority of industry executives still believe that adhering to rigorous ethical guidelines may work against them, according to an Economist Intelligence Unit report sponsored by the CFA Institute.

More than half (53%) of financial executives think flexibility on ethical standards is necessary for career advancement, according to the September survey of 382 asset management, banking, fund management and wealth management executives and 50 executives from firms that support financial services. Fifty-three percent of respondents also said that an over-emphasis on ethical conduct could make their firms less competitive.

Such statements are at odds with executives' professed commitment to ethical behavior. A vast majority (91%) of respondents said that ethical conduct was just as important as financial success at their firm, while another 91% said that a set of global ethical standards would be a boon to the financial services industry.

"Clearly there's a concerning disconnect between what they're saying about trust and the importance of ethics and what is actually happening in these organizations," says John Bowman, managing director and co-lead at the CFA Institute. The contradictions may be rooted in an industry-wide focus on short-term profits that has yet to catch up with post-financial crisis realities, according to Bowman.

"Culture is like the Titanic," he says. "It takes a long time to turn."

On the bright side, the survey suggests that the financial services industry is making efforts to reform. Sixty-three percent of firms represented in the survey had strengthened their formal code of ethical conduct over the last three years, while 61% had improved the system for evaluating employee behavior. Forty-three percent of respondents said that their companies had introduced financial or processional incentives intended to reward ethical behavior.

While the financial services industry may be edging toward a more principled way of doing business, there remains ample room for improvement, Bowman says.

The industry should "shift to a fiduciary culture," Bowman says. Whether companies have a legal fiduciary responsibility or not, Bowman says, aligning their values with those of their clients will help create a more transparent and ethical environment.

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