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4 ways Wall Street will regain the trust of Main Street: Takeaways from SIFMA Annual, part 1

It’s been over 5 years since the financial crisis, yet do you trust financial institutions the same way you did before 2008? Are you confident that Wall Street and the folks who represent the firms in banking are being transparent and working in your best interest?

These are the questions that were being asked and addressed last week at the SIFMA Annual Meeting in New York City.

Representing 575 member firms and over 800,000 employees in the securities business alone, SIFMA (Securities Industry and Financial Markets Association) brings together hundreds of securities firms, banks, and asset managers to promote job creation and economic growth.

At last week’s Annual Meeting, almost 1,000 financial services executives from America’s top banks congregated to hear from thought leaders, practitioners, and rule makers including former President Bill Clinton, Senator Judd Gregg, SEC Chair Mary Jo White, FINRA Chairman and CEO Richard G. Ketchum, and former Governor Jeb Bush.

The theme of the conference, “Helping Americans Succeed, Helping Main Street Prosper,” placed the spotlight on how financial institutions can restore the public’s trust and confidence in the industry.

So how will Wall Street and its financial institutions regain the trust of Main Street? Judd Gregg, SIFMA’s CEO and former U.S. senator, laid out 4 practices that SIFMA and its members are driving:

1. Putting clients first

“It’s the start of open dialogue and clear expectations, both of which build trust and are critical in helping clients determine their financial goals, then reach them through appropriate investments,” said Chet Helck, SIFMA chairman and CEO of Raymond James Global Private Client Group.

It is up to SIFMA members, he noted, to earn back trust and have the discipline to uphold standards by which they operate, as well as identify those who aren’t. He also shared with the audience that Raymond James Financial, when launching or changing new programs and offerings, always asks, “how does this affect our clients?”

Mary Jo White, chair of the SEC, added that the role of the SEC also facilitates this through regulations and enforcement of those regulations focused on transparency and fraud prevention.

2. Investing in America

The financial services industry plays a key role in the path to prosperity for Americans, said Jim Rosenthal, COO of Morgan Stanley, so the industry must continue to provide the foundation for growth and prosperity by funding small businesses through an efficient lending process.

From his own experience in meeting people from all walks of life as part of the Clinton Global Initiative, President Clinton said that one can’t underestimate the difficult position the majority of people face. Clinton offered specific ideas that the industry can help, including micro-credit lending to fund new business ideas, training, and new job growth.

Clinton also highlighted the need to target those with requisite skills and get them trained to prepare for the “next generation economy.”

3. Driving transparency and cooperation

It’s critical to transform the industry to be safer and more transparent to the general public.

To do this, regulations and enforcement help, but as Governor Jed Bush explained, it’s critical to “simplify the rules and make them more clear” for both the financial institutions’ teams who need to implement and abide by them and the general public.

In addition to transparency, cooperation is key. President Clinton highlighted that we live in one of the most interdependent ages in history: there has never been greater trade, travel, and technology than there is today. America and the financial services industry, he said, should focus on cooperation to drive shared prosperity. For example, large financial institutions and banks should find common causes with community banks who want to make good loans to individuals and businesses.

4. Educating on the importance of the market economy and financial literacy

Education campaigns, according to President Clinton, should focus on the basics:

  • Discuss issues or topics that are “self-evident”

  • Communicate “how we can help you” with specificity

  • Share how free enterprise works

  • Explain the rules and intent of Dodd-Frank

  • Provide examples of how “we think you can improve upon your current situation”

One program that highlights SIFMA’s commitment to educating the younger generation is its annual Stock Market Game, which helps elementary school students learn first-hand about the stock market.

Overall, the conference framed several of the challenges the industry and America faces, and offered many perspectives on potential solutions with initiatives like the one above to make SIFMA’s goals a reality.

One other practice I would offer to enhance and accelerate those above would be for financial services firms to invest in social media technology and training for its advisors, broker-dealers, and wealth managers to better reach Main Street. To her credit, when SEC Chair Mary Jo White was asked by session moderator, Peter Cook, Chief Washington Correspondent and Host of “Capitol Gains” for Bloomberg Television, whether or not she was a person who uses social media, she replied, “I think you have to be a social media person today to some degree.”

I couldn’t agree more.

Social media is a key way of driving transparency, empowering the public, and re-establishing trust. It can enhance how businesses reach their clients and give firms a personality.

How exactly? Stay tuned for part 2 of my takeaways and recommendations from SIFMA Annual.

Gary Liu

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