• Skip to primary navigation
  • Skip to main content

The Institute for the Fiduciary Standard

A resource site for investors, brokers, academics and the media.


Building a fiduciary culture of honesty, integrity, and expertise.

  • About
    • Fiduciary Law
    • Board of Directors
    • Board of Advisors*
    • Chairman’s Council
    • Real Fiduciary™ Practices Board
  • Real Fiduciary™
    • Real Fiduciary™ for Investors
      • Real Fiduciary™ Advisor Registry
      • Why You Need a Real Fiduciary™ Advisor
    • Real Fiduciary™ for Advisors
      • Real Fiduciary™ Affirmation Program
      • Real Fiduciary™ Background
  • Fiduciary September
    • 2022
    • 2021
    • 2020
    • 2019
    • 2018
    • 2017
    • 2016
    • 2015
    • 2014
    • 2013
    • 2012
  • Frankel Prize
    • 2022
    • 2021
    • 2020
    • 2019
    • 2018
    • 2017
    • 2016
    • 2015
    • 2014
    • 2013
  • Programs
    • Leadership Through Fiduciary Program
    • “Raise Your Voice” Campaign
    • SEC Conduct Standards Rulemaking
    • Institute Initiatives & News
    • Personal Financial Planning Program Webinars
    • Prior Programs
      • Advisor On My Side
      • No Incidental Investor Initiative
      • Bogle Legacy Forum
        • Bogle Forum
        • Bogle Book
      • August 11th 2015
  • Research
    • Academic Papers
    • Legislation and Rulemaking
    • White Papers
    • Op-Ed Commentary
  • Jack Bogle

Does Banking Deserve its Bronze Medal from Wall Street?

By Knut Rostad on August 18, 2016

thinkadvisor250

 

 

Originally published on ThinkAdvisor.com, August 18, 2016

A Tuesday Wall Street Journal editorial reported results of the annual Gallup Poll on the public’s “views of various industries.” The Journal concluded, “The public mood isn’t especially buoyant… though there is one notable exception: American business … most (industries) continue to have positive and durable reputations,” including banking and finance.

The WSJ’s cheery conclusion about American business is understandable, merited and important. It also misses a larger opportunity to challenge finance and banking to luxuriate in Gallup’s findings.

The Journal editorial notes Gallup surveyed Americans “across 25 areas” and found that all businesses/industries polled more positively than did the federal government. Correct. Combining favorable and unfavorable ratings for each industry, Gallup compared “net favorable / unfavorable ratings.”

On top was the restaurant and computer industry at 59% and 53%. At the bottom of industry ratings, healthcare and pharmaceuticals sit at minus 20% and 23%, respectively. Below this industry bottom, the WSJ correctly notes, with relish, is the federal government. The unfavorable rating of the federal government: minus 27%. As the Journal correctly concludes, “The worst performer in the Gallup survey? None other than the federal government…”

The Journal fairly notes that the local restaurant or grocery store or superstars of new economy, “the computer industry” far and away outperform the federal government in “trust.” But this is where a fair analysis pretty much stops.

There is no accounting for the wide variances among different industries’ net “positive” ratings. The Journal explains the five “net negative” industry ratings of oil and gas, legal, healthcare, pharmaceuticals and the federal government. It has no explanation of the significance of the wide range among industries’ net positive ratings. The enormous range is effectively overlooked.

Case in point. The computer industry, the second highest-ranked industry noted above, fairly wins Gallup’s silver medal with a net positive rating of 53%. Then the Journal effectively comes up with new rules to get banking on the Gallup medal podium. It creates a group of ten industries the Journal says have, “Images that are solid or near neutral,” and essentially awards them its bronze medal.

Even though banking sits at the very bottom of this group, seventeen places behind the second place computer industry in Gallup’s report, (and tied with advertising and PR in the 19th place), with a net positive rating of just 2%, it brings home a medal.

Is this 19th place Gallup showing of banking deserved? Other opinion research suggests so.

Consumer confidence in finance, banking, financial services or stock brokers, including  The Wall Street Journal’s own research, indicates that investor distrust from the financial crisis persists eight years later.

The WSJ surveys of consumer confidence in “the financial industry” from 2008 to 2014 report a tiny uptick from a very low positive rating, 10% to 13%. Meanwhile, Gallup surveys of stock brokers from 2008 to 2015 report virtual stagnation, from 12% to 13%. In a 2014 Harris survey, 50% of respondents reported they had “less” trust in “Banks” relative to “the past few years” and 9% said they had “more” trust. In 2012, the Atlantic / Aspen survey asked if executives of large Wall Street banks “share the same fundamental values” or have a “a different set of values.” By 79% to 17% consumers said Wall Street executives have different values.

No doubt banking, finance and stock brokers often get bum raps that hurt their reputations. The problem, though, is when leading voices in finance attribute any reputational problems they have to a few bum raps and then appear to believe that all criticism is essentially unfair or “without merit”. Resentment of any criticism can become the norm. Any chance to overlook weaknesses, booster industry morale, criticize the critics or exaggerate positives is grabbed.

The Journal takeaway, “Americans are more invested in the resilient private economy than in their public leaders.” This is true and important. But it blows a huge opportunity to reinforce a more fundamental takeaway from the Gallup report.

What if the Journal instead concluded by asking finance leaders, “How can banking continue its indispensable role, investing in the resilient private economy when it sits alongside “Madmen” in public confidence, while its newest competitor is nestled in the Silicon Valley halo 3000 miles and 51 percentage points away?”

 

Dan Moisand

 

Dan Moisand is a nationally recognized fiduciary fee-only financial planner, an Institute Real Fiduciary™ Advisor and Chair-elect of the CFP Board.

The Institute has enshrined the ‘Moisand Rule’ on fiduciary practices. It is basic and is more important today than ever: “You have to avoid conflicts. If I avoid a conflict, I don’t worry about it.”

Watch the video of Moisand speaking here.

Bob Veres

 

Bob Veres is a long term observer of financial planning. His Newsletter, “Inside information” Is a staple of leading planners. In the May edition he writes about fiduciary and the Institute.

"But a much bigger point is that the fiduciary standard—as Knut Rostad of the Institute for the Fiduciary Standard has pointed out—has been determined by the Supreme Court (1963 ruling) to be at the very heart of the Investment Advisers Act of 1940. It is the foundation of what it means to be an RIA registered with the SEC instead of a tipster or a tout."

- Bob Veres, Parting Thoughts ... The SEC's Own Compliance Culture

  • Contact

 

  • LinkedIn
  • Twitter

Copyright © 2023 · Web Design by Milkweed Web