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

Start your day with The Independent, sign up for daily news emails
Arts and Entertainment
The Bach Choir has been crowned the inaugural winner of Sky Arts’ show The Great Culture Quiz
arts + ents140-year-old choir declared winner of Sky Arts' 'The Great Culture Quiz'
Life and Style
food + drink
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

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

iJobs Job Widget
iJobs Money & Business

Carlton Senior Appointments: Private Banking Manager - Intl Bank - Los Angeles

$200 - $350 per annum: Carlton Senior Appointments: Managing Producer – Office...

Carlton Senior Appointments: San Fran - Investment Advisor – Ind Advisory Firm

$125 - $225 per annum: Carlton Senior Appointments: San Fran - Investment Advi...

Sheridan Maine: Commercial Finance Manager

Up to £70,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...

Sheridan Maine: Regulatory Reporting Accountant

Up to £65,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...

Day In a Page

Homeless Veterans appeal: 'You look for someone who's an inspiration and try to be like them'

Homeless Veterans appeal

In 2010, Sgt Gary Jamieson stepped on an IED in Afghanistan and lost his legs and an arm. He reveals what, and who, helped him to make a remarkable recovery
Could cannabis oil reverse the effects of cancer?

Could cannabis oil reverse effects of cancer?

As a film following six patients receiving the controversial treatment is released, Kate Hilpern uncovers a very slippery issue
The Interview movie review: You can't see Seth Rogen and James Franco's Kim Jong Un assassination film, but you can read about it here

The Interview movie review

You can't see Seth Rogen and James Franco's Kim Jong Un assassination film, but you can read about it here
Serial mania has propelled podcasts into the cultural mainstream

How podcasts became mainstream

People have consumed gripping armchair investigation Serial with a relish typically reserved for box-set binges
Jesus Christ has become an unlikely pin-up for hipster marketing companies

Jesus Christ has become an unlikely pin-up

Kevin Lee Light, aka "Jesus", is the newest client of creative agency Mother while rival agency Anomaly has launched Sexy Jesus, depicting the Messiah in a series of Athena-style poses
Rosetta space mission voted most important scientific breakthrough of 2014

A memorable year for science – if not for mice

The most important scientific breakthroughs of 2014
Christmas cocktails to make you merry: From eggnog to Brown Betty and Rum Bumpo

Christmas cocktails to make you merry

Mulled wine is an essential seasonal treat. But now drinkers are rediscovering other traditional festive tipples. Angela Clutton raises a glass to Christmas cocktails
5 best activity trackers

Fitness technology: 5 best activity trackers

Up the ante in your regimen and change the habits of a lifetime with this wearable tech
Paul Scholes column: It's a little-known fact, but I have played one of the seven dwarves

Paul Scholes column

It's a little-known fact, but I have played one of the seven dwarves
Fifa's travelling circus once again steals limelight from real stars

Fifa's travelling circus once again steals limelight from real stars

Club World Cup kicked into the long grass by the continued farce surrounding Blatter, Garcia, Russia and Qatar
Frank Warren column: 2014 – boxing is back and winning new fans

Frank Warren: Boxing is back and winning new fans

2014 proves it's now one of sport's biggest hitters again
Jeb Bush vs Hillary Clinton: The power dynamics of the two first families

Jeb Bush vs Hillary Clinton

Karen Tumulty explores the power dynamics of the two first families
Stockholm is rivalling Silicon Valley with a hotbed of technology start-ups

Stockholm is rivalling Silicon Valley

The Swedish capital is home to two of the most popular video games in the world, as well as thousands of technology start-ups worth hundreds of millions of pounds – and it's all happened since 2009
Did Japanese workers really get their symbols mixed up and display Santa on a crucifix?

Crucified Santa: Urban myth refuses to die

The story goes that Japanese store workers created a life-size effigy of a smiling "Father Kurisumasu" attached to a facsimile of Our Lord's final instrument of torture
Jennifer Saunders and Kate Moss join David Walliams on set for TV adaptation of The Boy in the Dress

The Boy in the Dress: On set with the stars

Walliams' story about a boy who goes to school in a dress will be shown this Christmas