As protests inspired by the month-long Occupy Wall Street demonstrations against the financial industry spread to cities throughout the world, there are signs that industry practitioners are taking notice. But, rather than facile disparagement, at least one leading specialist said that the complaints and direct action have some merit, and that there is need for a sympathetic response.
“Is this the last gasp of disgust over the global financial crisis of 2008-09, or is it the first shot in a whole new war against finance?” asked John Rogers, president and chief executive of CFA Institute, the world’s leading association of investment professionals.
On the assumption that it is the latter, and that people have had enough of “too many ostentatious paydays for financiers, and not enough jobs or wealth creation for the average person”, Rogers pondered in an essay on Friday about what will happen next and what his organisation can do.
The CFA Institute should have a powerful and effective voice. Headquartered in Charlottesville, Virginia, and with offices in London and Hong Kong, as well as 136 societies in 57 countries, it has more than 100,000 members. It is a global, non-profit organisation with a stated aim of developing and promoting the highest educational, ethical and professional standards in the investment industry. It is perhaps most well-known for administrating the rigorous CFA exams.
The finance business has alienated ordinary people in at least two profound ways, said Rogers. First, “it has appeared to be a profit collector rather than a spark plug of economic growth”. Second, “the guys on Wall Street [and in other financial centres] seem to be making lots of money these days, when most people are struggling to get by”. This anger is made worse by the stagnation or decline in the value of assets held as savings by the general public — making a nonsense of prudential, long-term planning.
Basically, it feels unfair. Demonstrations across Europe and Asia-Pacific (including Hong Kong and Tokyo) during the past few days indicate that the sense of anger and frustration is very much a global phenomenon, heavily reliant on social media to mobilise. According to newspaper reports at the weekend, organisers said protests would be held in around 950 cities across 80 countries in Europe, North America, Latin America, Asia and Africa.
And if these protests are the first shot in a new battle, then “the movement will most likely spread to organised labour, to progressive citizen groups and ultimately to candidates for public office”, Rogers pointed out. After all, populist movements can vote and force change.
Demands could include taxes on financial transactions, confiscation of profits at the firm and employee level, socialisation of finance and “other fairly disruptive outcomes”.
But Rogers said that the industry can, and needs to, do certain things to repair its image.
In the first place, it can “renew a commitment to supporting society’s interests in matching risk capital to the needs of enterprises that drive and sustain economic vitality”. Besides, matching capital and good ideas to create communities is “the essence of finance”.
Next, “the profession must again embrace the concept of fiduciary behaviour”. Rogers argued that firms that pursue personal and shareholder profits ahead of everything else “will ultimately alienate themselves from customers, regulators and sound ethical practice”. Ethical considerations are key to any effort by the financial services industry to restore its image with society as a whole.
Finally — and perhaps rather idealistically — Rogers suggested that the Occupy Wall Street movement could “generate new models of financial institutions that respond to the entirely legitimate concerns of the people”.