Home » Blog » Know Your Broker » Wisdom for Wall Street

Wisdom for Wall Street

Over the past few years, the media has been obsessed with blaming Wall Street for our nation’s economic woes. The current administration certainly has set that tone, but much of its criticism has been conceived for purely political gain.

Yet at the same time, we Americans have the responsibility of making sure our core institutions are functioning to our optimal benefit. This is especially true for insurance brokers like me and other professionals in the financial services industry. If we see an area needing improvement, then we must get the word out; in the long run, it will be best for both our country and our careers.

One of the captains of our industry is John G. Taft. He is the CEO of RBC Wealth Management, which has over $235 billion under stewardship. He comes from a very distinguished family that includes a US President, a Supreme Court Chief Justice, attorney generals, and many other public servants.

Public service is actually his family legacy. He spoke about that in a recent interview with Steve Forbes (1). To him, morality must be the foundation of the money business. Below you will find some of his comments that point to a new direction for the growth of the Wall Street culture.

Reclaiming the service ethic
“I did feel that in joining the investment banking firm that I joined after getting out of business school, that I was doing my part to leave the world a better place. I had been a newspaper reporter. I covered the rebuilding of an industrial city in Northeastern Massachusetts – Lowell, Massachusetts. And that’s what I wanted to do.”

“I went back and got a graduate degree and went to work in public finance, raising money for state and local governments to build public projects, help finance schools, build convention centers, that type of thing. I felt that in doing that for state and local governments, not profit entities, I was doing my part to serve the world. That’s an antiquated notion right now, and one that unfortunately has been discredited by behavior on Wall Street over the last several years.’

“It seems to be an antiquated notion these days almost. But doing well by serving your clients is, in fact, a time tested formula that we need to get back to and reconnect with.”

The financial institution is a means to an end, not an end unto itself
“We’re supposed to connect up people who have money with people who need money, do it in a way that capital is efficiently allocated, manage the risks involved in doing that, so that the economy grows at an optimal rate. In other words, we are a means to greater ends. What we lost sight of was that particular role. And we started thinking of ourselves as an end unto ourselves. We stopped focusing on our clients and on serving our clients and started focusing too much on making money for the institution, its shareholders and its employees. And that led to a bunch of behavior that played no particularly socially important role. Those activities are what got us in trouble.”

The need for older and wiser money management personnel
“… the data again I’ve read is that the single biggest driver of what you might call moral capacity, the capacity to behave in a responsible way, even if you don’t, is how long have you been alive?”

“How long have you been walking the planet? And what kinds of experiences have you had? There is no way a 30-year old, you know, recent graduate of a business school, has the same moral capacity as a 65-year old head of medicine at a teaching hospital. Doesn’t happen…”

“One of the things I may ask you about, when’s the last time you saw a 67-year old head of statistical arbitrage trading on Wall Street? You haven’t. They’re 38 years old. So what kind of moral capacity does that 38-year old have controlling $105 billion of corporate capital? Question.”

“You know, so maybe we ought to provide incentives for people on Wall Street to stick around longer and make sure we have moral exemplars in place.”

(1) “Can You Be Moral And Make Money? – Forbes.” Information for the World’s Business Leaders – Forbes.com. N.p., n.d. Web. 22 May 2013. .