Fearless Fiduciary: Why People Hate the Financial Industry
I was raised by parents who advised great caution in ever using the word “hate.” Whether persons or things, life has a funny way of changing matters, they said, warning I would regret hasty and often anger-based labels. So maybe I could use the word “scorn” or “distrust” to describe how people feel about our world of finance. To be honest, it is time to stop mincing words and making excuses for this industry our members know and love.
It is common knowledge that many opinion polls rate the financial services industry very low on the scale of trust and integrity. Theories abound on why that is. Some pass it off as just a public relations problem. Spurred by media hype over the unusual rash of high-profile market disruptions beginning with the 2008 financial crisis and accompanying Dow plunge, its related bailouts, then Madoff, and on through a confidence-shattering flash crash, the court of public opinion simply becomes spooked. People overreact and become convinced that everything about finance is rigged and dishonest. Nothing another 5,000 points up on the Dow can’t fix, they’ll say.
Others see a fundamental shift in the level of dishonesty, greed, and unethical behavior in the industry. They pine for an industry that once was a professional calling, which cared strongly about a client’s well-being. That profession, they feel, has morphed into a business absolutely focused on gathering assets and extracting fees. Moreover, it is an industry now overrun by hotshot, overpaid hucksters looking for the next chance to fleece one another, clients, or both. They don’t seem particular about their next financial mark.
Whether negative perceptions or an actual decline in industry integrity, it has the public, investors, and even our CFA Institute members very upset. Let’s call it what it is — hate is not too strong a description under the circumstances. Our recent annual survey of CFA Institute members called the Global Market Sentiment Survey provides some telling, and even surprising, data points on this score. For openers, 98% of the nearly 7,000 survey respondents acknowledge a serious lack of trust in the finance industry. We wondered where the other 2% have been hiding these last few years, but that is a story for another day. In addition, 74% see little room for improvement in trust for 2013. Our very own card-carrying CFA Institute members, who populate this industry across the global markets, spare no measure of frankness in their assessment of the situation. We are our own harshest (and I would add most honest) critics.
The natural follow-on to this dire report card is to ask why. What factor, we asked, contributes most to the lack of trust in this world of finance? To our surprise, there is only slight off-loading of blame onto public opinion or media hype of external factors such as market shocks, news of fraudulent scoundrels, LIBOR, or the like. By a large margin, members say it is the lack of ethical culture at finance firms that has, and continues to, mire us in this lowly state of distrust. Amazingly, 56% of respondents make this revealing and candid assessment of our industry. Only 16% say the trust gap is due to weak enforcement or market disruptions.
This frank admission that the enormously challenging problem of restoring trust and confidence is largely an internal one is revealing about this industry and our members. The need for a strong jolt to industry culture is clear. In the world of psychology, self-awareness is an important ingredient to changing bad behavior. Here’s looking forward to a future state of finance where our industry is no longer hated.