Martin Scorsese and Leonardo DiCaprio’s latest collaboration, The Wolf of Wall Street, is the talk of the town following glowing critical reviews, award glory, and a host of questions raised about what it means for the industry it portrays today.
I am struck at the contrast between that movie and one of the most iconic banking films ever made and festive favourite the world over: It’s a Wonderful Life. One film I was excited to finally share with my children over the holidays; the other I would never recommend to them. One, a celebration of the best of the human spirit; the other, a caricature of the depths of our depravity.
Don’t get me wrong; I have no moral argument against artistic license for those who want to show the life of a villain unfold. I’m convinced that the real moral outrage over The Wolf of Wall Street is not the glorifying of the “bad guy,” Jordan Belfort, the brash young stockbroker who carried out massive securities fraud and corruption in the 1990s. Rather, I think the public’s response stems from lingering frustration about the fundamental flaws that still exist in the finance industry, even five years after the beginning of the financial crisis.
This crisis was unlike any other; it was first a crisis of trust. Commentators who focus on the equity market crash, the systemic risk breakdown, the GDP collapse, or even the housing crisis aren’t seeing the forest for the trees: Main Street therefore feels the residual crisis much more than Wall Street. The stories of investment bankers booking out entire cinemas in London to see the film only solidify the general public’s suspicion that Wall Street is ignoring that reality.
When our industry loses touch with the public to this degree, we’ve lost their trust – and when an “agent,” as all advisers inherently are, loses the trust of the underlying beneficiary, the value proposition of that agent vanishes. When the industry is viewed (rightly or wrongly) as rigged, clients will look to invest and save elsewhere and by other means.
What the public is looking for is in fact captured perfectly in that paragon of financial trust: George Bailey in It’s a Wonderful Life. Bailey produced only humble profits at his family’s savings and loan company, but he sacrificed his honeymoon savings to put the interests of his customers above his own – safeguarding retirements, funding housing developments, creating jobs. Yes, this is a dramatized story, but it does illustrate what should be our industry’s main purpose, and what the public expects us to do — serve the greater good.
A recent survey conducted by CFA Institute in partnership with Edelman showed that the general public is indeed demanding change — change that reconnects us to the industry’s original purpose of serving, not ignoring – or worse, exploiting – broader society. The survey found that retail investment clients overwhelmingly believe that trust is the most important factor in hiring an investment advisor. More broadly, they viewed behavioral and ethically related attributes, such as transparent business practices and integrity, as much more important than performance metrics.
How is the industry adjusting to this strong demand from their clients? In a phrase, too slowly.
Last November, the Economist Intelligence Unit published a report sponsored by CFA Institute titled “A Crisis of Culture: Valuing Ethics and Knowledge in Financial Services.” The report investigated the culture within leading firms around the world in an attempt to better understand the importance placed on ethical conduct.
Sadly, the report offered astounding insight into the weaknesses that still exist in the financial industry.
Although almost 100 percent of investment professionals agreed that ethical behavior was important, over half believe that career progression at their firm would be difficult without being “flexible” on ethical standards, and only 37% believe that better ethics lead directly to financial results. Just 43% said that their firm offers career or financial rewards for respecting the ethical code of conduct.
This is a profoundly troubling disconnect between words and behavior that could be the result of empty promises (they don’t mean what they say) or simply the natural lag effect of substantive cultural changes (these values take time to root themselves in corporate DNA). Either way, the suggestion that ethics is at odds with financial performance is just plain wrong, and it shows how much further the industry has to go to restore trust.
The finance industry can be an extraordinary force for good, helping to solve problems through innovation and entrepreneurial spirit, ensuring the well-being of communities, and achieving the broader goals of a stable and healthy society.
But we all must play our part. George Bailey understood that integrity and long-term relationships make for better citizens and better clients. Let’s collectively ensure that the next great finance story nominated for an Academy Award for Best Picture will showcase the industry as a positive, not a negative, force. We need more fiduciaries of Main Street and fewer wolves of Wall Street.
The Wolf of Wall Street: Most outrageous quotes
The Wolf of Wall Street: Most outrageous quotes
"My Ferrari was white—like Don Johnson's in Miami Vice—not red"
"I’ve been a poor man, and I’ve been a rich man. And I choose rich every f*****g time."
"I take Quaaludes 10-15 times a day for my back pain. Adderall to stay focused. Xanax to take the edge off, part to mellow me out, cocaine to wake me back up again, and morphine...Well, because it's awesome"
"My name is Jordan Belfort, the year I turned 26, I made $49 million, which really pissed me off because it was three shy of a million a week" (Leonardo Dicaprio pictured as Belfort in The Wolf of Wall Street)
"“I had lots of nicknames: Gordon Gekko, Don Corleone, Kaiser Soze; they even called me the King. But my favourite was the Wolf of Wall Street"
"Money doesn't just buy you a better life, better food, better cars, better p***y – it also makes you a better person"(Pictured: Jordan Belfort, the real Wolf of Wall Street)
"Act as if! Act as if you're a wealthy man, rich already, and then you'll surely become rich" (Pictured: Jordan Belfort, the real Wolf of Wall Street)