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Stewardship Standards

Vincent explores the debate of Industry Standards, Duties, Best Practices and Regulatory Trends

The views and opinions expressed in this blog are those of Vincent Micciche and do not necessarily reflect those of LifeMark Securities









Financial Institutions Should Explain “Why”

Financial Institutions Should Explain “Why”

Author and leadership expert Simon Sinek has, for years, explored what I believe to be of the most intriguing predictors of corporate behavior. In a Ted Talk , he presented what he calls the “Golden Circle” at whose heart lays the definitive question “Why”. In his talk he notes that an enterprise explaining what they do and how they do it explains little about their differentiation. However, explaining “why” can reveal abundant information about their nature, purpose and motivation.

Modern regulation of the financial services industry is rules based but evolving. Those rules are primarily derived from the Securities acts of 1933 and 1934 and the Investment Advisors Act of 1940. Because the industry is now very multidimensional, there are numerous regulatory authorities with overlapping jurisdiction that control the conduct of business in the Financial Services Industry. For example, a financial advisor may be providing investment advice, financial planning and selling insurance and securities. In this case there are at least three different sets of rules and regulations that apply and decidedly different standards of care ranging from suitability to fiduciary.

It’s not difficult to understand why the industry feels this inefficient replication impedes their ability to serve their clients, conduct business in a compliant manner and make a profit. On the other hand, it shouldn’t surprise anyone that the ambiguity of regulations and standards leaves the consumer confused, skeptical and in some cases wary of what should be a “Trusted Advisor”.

As we slowly recover from the catastrophic meltdown in the financial markets in 2008, regulation of the industry is evolving from rules to principles based. Regulators, following the lead of FINRA, are beginning to explore the “culture” of firms as a means of assessing compliance risk. If successful it may help identify the predators and true professionals in the industry and help direct enforcement actions. Ultimately, I would hope it helps to remove the bad actors whose actions have undermined public trust and confidence in the financial services industry.

Financial institutions should step up and support this effort – it’s good the public and good for the industry. They can begin by developing and publishing an “ethos”. Derived from old Greek, it describes the distinguishing character, sentiment, moral nature, or guiding beliefs of a person, group, or institution.

Here is a great example from Lifemark Securities an independent financial services firm www.lifemark.com

LifeMark Securities’ Ethos

As a trusted advisor, LifeMark serves its clients honorably and with distinction. We serve our industry by advocating higher standards of care and our community by acknowledging our social responsibilities.

We believe that a meritorious and enduring relationship is built on a foundation of financial stewardship. The courage, character and personal integrity of every member of our firm is what defines who we are and how we serve.

We believe that technical expertise alone is insufficient - it must be coupled with a commitment to serve that is borne of moral obligation. This is our pursuit of excellence and the heart of financial wisdom.

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