Views on improving the integrity of global capital markets
08 June 2015

How Would You Change Finance for the Better?

As part of Putting Investors First Month May 2015 we asked CFA Institute constituents via social media: How would you change finance for the better? By the way, if you would like to respond to this thread please do by using the #InvestorsFirst hashtag on social media. Also, be sure to visit the Putting Investors First website. Here then is a sampling of some of the more interesting responses that we received.

Industry Level

Many commenters emphasized changing the industry directly. One example repeated multiple times is to alter the incentives so that pay more closely aligns with clients achieving their objectives. Closely related to this suggestion is to change the entire emphasis of finance away from obsession with returns, and instead focus firm and adviser efforts on achieving client’s goals.

Among the more adventurous suggestions — again, repeated by many — was to break up the big banks. Just how this should be done was not offered by the contributors. However, in a recent Future of Finance Online Forum, “Is Finance a Noble Profession?,” it was suggested that a return to the finance and banking industry of Glass-Steagall is an appropriate direction.

Another excellent way for changing the industry suggested was for the industry as a whole to begin emphasizing its societal benefit. Many practitioners over the years have said that the benefits of finance are largely ignored in the press and by regulators, while the missteps get endless play. However, our contributors suggested that the entire philosophical focus of the industry must be on creating societal benefit, rather than simply meeting quarterly profit targets, or reaching individual performance targets solely to earn outsize bonuses.

At a more regional scale, those responding to our query suggested that finance could benefit by better recognizing the needs of individual global regions. That is, the needs of the citizens of the continent of Africa tend to be very different from those of the citizens of Australia, for example. Also, Islamic finance and its emphasis on ethics were seen as a source of inspiration for all of finance.

Client Level

At the client level there were many suggestions for how to change finance for the better. One such suggestion, oft-repeated over the years, is to better educate the public about investing. Some contributors fired back, however, that one way to aid the general public’s understanding of finance is to simplify the language used to describe finance. In other words, less jargon, more real-life examples, and a shift away from product descriptions that only the experts can understand. Dove-tailing nicely with this suggestion was to increase transparency about performance, risks, and fees.

Regulatory Level

Our respondents also fought for the individual client on insisting that all financial professionals dealing with, and pitching to, the public be required to adhere to a fiduciary standard. In fact, CFA Institute President and CEO Paul Smith, CFA, at the 68th Annual Conference in Frankfurt stated that a long-term goal is that the CFA charter be a regulatory requirement comparable to the legal requirement that lawyers pass the barristers (i.e., the bar) exam, or various medical associations and their requirements for becoming a doctor.

Several respondents suggested that more needed to be done at the criminal level, rather than just the regulatory level. That is, they believed that wrongdoers should not just pay fines, but also serve jail time. Still others felt that to improve finance required less regulation, not more.

All in all, it was a lively and passionate discussion. Thank you to all those who took the time to contribute!

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About the Author(s)
Jason Voss, CFA

Jason Voss, CFA, tirelessly focuses on improving the ability of investors to better serve end clients. He is the author of the Foreword Reviews Business Book of the Year Finalist, The Intuitive Investor and the CEO of Active Investment Management (AIM) Consulting. Voss also sub-contracts for the well known firm, Focus Consulting Group. Previously, he was a portfolio manager at Davis Selected Advisers, L.P., where he co-managed the Davis Appreciation and Income Fund to noteworthy returns. Voss holds a BA in economics and an MBA in finance and accounting from the University of Colorado.

Ethics Statement

My statement of ethics is very simple, really: I treat others as I would like to be treated. In my opinion, all systems of ethics distill to this simple statement. If you believe I have deviated from this standard, I would love to hear from you: [email protected]

6 thoughts on “How Would You Change Finance for the Better?”

  1. We need to expand fiduciary duty to look at the whole person, not just short-term economic return.

    1. Hello James,

      Thank you for insight. I am guessing you support fiduciary duties being attached to brokers, too?

      Yours, in service,


      1. Definitely. Brokers should serve their clients before serving themselves and should know their clients a lot better than most do.

        1. J’agree, and well said!

  2. Daryl Greco says:

    Brokers for the most part are honest individuals trying to serve their clients as best as possible in this extremely competitive marketplace. The problem I see today is a lack of consistency in oversight. While regulators focus on low level brokers after complaints are made, large institutional executives have total immunity against prosecution from their front running, selling mislabeled products and an overall scorched earth policy.. That is the perception today and that is what has killed retail business world wide.

    How is it possible that major banks have paid $200 Billion in fines in the past three years and recently plead guilty to multiple felony’s and not one human being or executive was prosecuted? How is that President Obama appoints an industry insider and lawyer of one of the banks that plead guilty to felony’s and today pays $1 of every $3 it earns towards fines? Is it any wonder she has done zero in her job?

    If you want to clean up the financial world start at the top. Hire competent people with no conflicts of interest to run and administer regulatory agencies.
    Give them the proper budget for oversight. Most important is closing the revolving door between regulators who later wind up working for investment banks. People whose futures depend on them doing nothing surely will not rock the boat for fear of not being hired for big money down the road. Place a 5 year moratorium on Investment Banks, brokers, Financial Industry lobbyists, trading firms or funds hiring former regulators or paying them for consultations.

    This is where you begin.

    1. Jason Voss, CFA says:

      Thanks for your comments. We are currently at work on a project examining the extent and impact of “regulatory capture” that addresses some of the conflicts of interest you mention; look for the report sometime this autumn.

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