Bankers must try getting rich slowly, for a change

As City veteran Sir Richard Lambert grapples with a new standards regime for the financial industry, Robert Jenkins, a former member of the BoE's banking watchdog, offers advice in an open letter

Sir Richard,

To anyone with a bank bashing bent, banker behaviour is the gift that keeps on giving. Revelations regarding JP Morgan and Madoff or RBS and Iran are but the latest additions to a lengthy list. Will it never end? All of which reminds me you are leading a new body to put standards and ethics back into banking. I wish you well. I understand your efforts will be independent of the banks that fund it. I wish you luck. Might it not be wise to balance the selfless generosity of your banking backers with financial support from the many groups who consume their services?

I believe your very first deliverable is a code of conduct. Here I have good news. Help is to hand. A model code is already available courtesy of the CFA Institute. As you will be aware, the Institute is the leading standards-setting body for the global investment profession. Members who pass a series of demanding exams earn the title Chartered Financial Analyst. The CFA moniker is highly regarded. There are over 10,000 charter holders in the UK and more than 110,000 worldwide. The curriculum has long incorporated a code of ethics by which the investment professional should operate. In 2005, the Institute extended this sense of duty to the level of the money management firm with the addition of an Asset Manager Code of Conduct. Signatories are required to formally attest to compliance. Some 900 firms currently do so. As you can imagine, many of these are investors or potential investors in the shares of banks.

Recently, the organisation went one step further and issued a Statement of Investor Rights. The purpose is to "advise buyers of financial service products of the conduct they are entitled to expect from financial service providers." The CFA's objective, like your own, is to help restore trust in the financial system. This bill of customer rights is pretty short and very powerful. It sports only 10 points to wit: consumers of financial services have a right to: 1) honest, competent and ethical conduct; 2) independent, objective and thoughtful advice; 3) the client's interest should take priority; 4) fair treatment with respect to other clients; 5) disclosure of conflicts of interest; 6) suitability of service in relation to client circumstances; 7) clear communication; 8) transparent, fair and reasonable fees; 9) confidentiality and 10) appropriate supporting records. No doubt you will improve upon this list. But should you be pressed for time, you could do worse than replicating it.

At the heart of the matter is how best to put the client first. Here, banks must answer – and clearly – two questions: 1) who is the client and 2) where does he rank in the pecking order? Regulators will insist that banks understand the former. Clients and bank shareholders deserve to know the latter. What a great opportunity you have to set the record straight.

I suspect this notion of "putting the customer first" will prove the most challenging part of your task. Banks serve multiple stakeholders – among which: executives, employees, shareholders, communities, society at large – and oh yes, customers. In the opinion of shareholders executives have ranked to near to top. In the opinion of customers, they have ranked pretty far down the roster. Given the plethora of penalties for misconduct it would be hard to argue otherwise. So you need to move the client up the list. Now, no doubt your silent banking backers will sheepishly suggest that doing so will conflict with their duty to the shareholder. And it is true that if short term profitability is a bank's main measure and motive, then putting the client first is indeed a problem.

However, if the objective is to build a solid enterprise which creates sustainable shareholder value, then putting the customer towards the top could well drive success for all. It just depends on one's time horizon for success. Naturally, bank executives would also have to be in it for the longer term and their incentives structured accordingly. But then, getting rich slowly would not be so bad for bankers would it? I mean, the "get rich quick" approach didn't really work out so well for most of the stakeholders on your list last time around – did it? And besides, banks are serious about all of this ethics and conduct stuff aren't they?

I look forward to reading your recommendations. Don't be timid. Your financial backers aren't.

Yours sincerely,

Robert Jenkins

Robert Jenkins is a Senior Fellow at Better Markets and a Governor of the CFA Institute. He recently served on the Bank of England's Financial Policy Committee

PROMOTED VIDEO
Arts and Entertainment
Babysitter Katie and Paul have terse words in the park
tvReview: The strength of the writing keeps viewers glued to their seats even when they are confronted with the hard-hitting scenes
News
i100
Arts and Entertainment
American singer, acclaimed actor of stage and screen, political activist and civil rights campaigner Paul Robeson (1898 - 1976), rehearses in relaxed mood at the piano.
filmSinger, actor, activist, athlete: Paul Robeson was a cultural giant. But prejudice and intolerance drove him to a miserable death. Now his story is to be told in film...
Sport
England’s opening goalscorer Alex Oxlade-Chamberlain battles with Scotland’s Charlie Mulgrew
FootballEngland must learn to keep possession and dictate games before they are exposed by the likes of Germany and Brazil
Life and Style
Make-up artists prepare contestants for last year’s Miss World, held in Budapest
fashion
Sport
Wigan Athletic’s back-of-the shirt sponsor Premier Range has pulled out due to Malky Mackay’s arrival
Football
News
ebooksNow available in paperback
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

SThree: Trainee Recruitment Consultant - Soho

£20000 - £25000 per annum + OTE £35,000: SThree: We consistently strive to be ...

Ampersand Consulting LLP: Markit EDM (CADIS) Developer

£50000 - £90000 per annum + benefits: Ampersand Consulting LLP: Markit EDM (CA...

Carlton Senior Appointments: Director, Private Bank - San Francisco, CA

$175 - $200 per annum, Benefits: full benefits: Carlton Senior Appointments: P...

Carlton Senior Appointments: San Diego, CA – Tier 1 House - Senior MD FA

Not specified: Carlton Senior Appointments: Senior MD Financial Advisor - San ...

Day In a Page

US immigration: President Obama ready to press ahead with long-promised plan to overhaul 'broken system' - but will it get past a Republican-controlled Congress?

Immigration: Obama's final frontier

The President is ready to press ahead with the long-promised plan to overhaul America's 'broken system' - but will it get past a Republican-controlled Congress?
Bill Cosby rape allegations explained: Why are these allegations coming out now? Why didn’t these women come forward earlier? And why has nobody taken legal action?

Bill Cosby rape allegations explained

Why are these allegations coming out now? Why has nobody taken legal action? And what happens next for the man once thought of as 'America's Dad'
Four years of excruciating seizures caused by the 1cm tapeworm found burrowing through a man's brain

You know that headache you’ve got?

Four years of excruciating seizures caused by the 1cm tapeworm found burrowing through a man's brain
Travelling to work by scooter is faster than walking and less sweaty than cycling, so why aren’t we all doing it?

Scoot commute

Travelling to work by scooter is faster than walking and less sweaty than cycling, so why aren’t we all doing it?
Paul Robeson: The story of how an American icon was driven to death to be told in film

The Paul Robeson story

How an American icon was driven to death to be told in film
10 best satellite navigation systems

Never get lost again: 10 best satellite navigation systems

Keep your vehicle going in the right direction with a clever device
Paul Scholes column: England must learn to keep possession and dictate games before they are exposed by the likes of Germany and Brazil

Paul Scholes column

England must learn to keep possession and dictate games before they are exposed by the likes of Germany and Brazil
Michael Dawson: I’ll thank Spurs after we win says defender as he prepares to return with Hull

Michael Dawson: I’ll thank Spurs after we win

Hull defender faces his struggling former club on Sunday ready to show what they are missing. But he says he will always be grateful to Tottenham
Frank Warren column: Dr Wu has big plans for the professionals yet he should stick to the amateur game

Frank Warren column

Dr Wu has big plans for the professionals yet he should stick to the amateur game
Synagogue attack: Fear unites both sides of Jerusalem as minister warns restoring quiet could take 'months'

Terror unites Jerusalem after synagogue attack

Rising violence and increased police patrols have left residents of all faiths looking over their shoulders
Medecins sans Frontieres: The Ebola crisis has them in the headlines, but their work goes far beyond West Africa

'How do you carry on? You have to...'

The Ebola crisis has Medecins sans Frontieres in the headlines, but their work goes far beyond West Africa
Isis extends its deadly reach with suicide bombing in Kurdish capital

Isis extends its deadly reach with suicide bombing in Kurdish capital

Residents in what was Iraq’s safest city fear an increase in jihadist attacks, reports Patrick Cockburn
Underwater photography competition winners 2014 - in pictures

'Mysterious and inviting' shot of diver wins photography competition

Stunning image of cenote in Mexico takes top prize
Sir John Major: Negative West End portrayals of politicians put people off voting

Sir John Major hits out at theatres

Negative West End portrayals of politicians put people off voting
Kicking Barbie's butt: How the growth of 3D printing enabled me to make an army of custom-made figurines

Kicking Barbie's butt

How the growth of 3D printing enabled toy-designer to make an army of custom-made figurines