An EthicAlly in Financial Services
How the American College Cary M. Maguire Center for Ethics in Financial Services is changing the way we think about trust
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It’s no secret that we’re living through an age of major trust issues; all you have to do is turn on the news in the morning. People across the country, and around the world, are more guarded, jaded, and suspicious of each other than we’ve ever been. Public confidence in the government and other entities created to protect and serve us have cratered. Misinformation, disinformation, and rage spread like wildfire over social media, drowning out the facts and measured arguments based on reason.
There’s no easy answer to the quandary we find ourselves in. But one thing that could help is a good, healthy dose of ethics. That’s where the American College Cary M. Maguire Center for Ethics in Financial Services’ team is stepping in to help. As the only ethics center within an academic institution focusing exclusively on the financial services industry, the Center stands alone not only because of its singular nature, but because of the passion and dedication of those running it to change the industry, and society at large, for the better. And you might be surprised to learn that those fixes actually start small.
“If there’s one thing I’ve learned, it’s that regulation isn’t the answer to every problem,” says Azish Filabi, JD, MA, executive director of the Center for Ethics in Financial Services. She’s a lawyer by training, and had her first glimpse of the importance of ethics in financial services during the 2008 financial crisis while working at the NY Fed. “We’ve all seen the evidence of rising inequality, financial and otherwise, and how unfettered some parties have become with taking advantage of people and hurting the environment despite all the laws on the books. Investors and the general public aren’t happy, and the problem has become so bad it needs to be addressed. Because of this, decisions at the individual and the firm level have become extremely important.”
Trust in the financial services industry has been famously low since 2008, with an oft-cited Edelman survey ranking it one of the least-trusted business sectors among most Americans. However, there have been encouraging signs of progress, including data from the Center for Ethics in Financial Services’ own in-depth study on the topic. Full results from the study will be published soon, and findings have been rolling out over the past year, including takeaways from interviews with corporate leaders on the importance of trust to their business models and an exclusive webcast discussing those findings.
“We’re optimistic,” says Domarina Oshana, PhD, the Center’s director of research and operations, and the driving force behind the study. “There’s been some improvement over the past few years, to the point where our data shows financial services ranking in the middle, not the bottom, of trust among service industries.” A social scientist with roots in psychology, Oshana is no stranger to issues of trust herself. “Among scientists, we have a code of ethical conduct when doing research…so, ethics has always been part of my work,” she says.
As this duo runs the Center for Ethics in Financial Services’ day-to-day operations, they’re constantly inspired by the mission of The College to spread knowledge and education and benefit society. “I was excited to join The College because ethics is fundamental for the institution and our leaders, both professionally and personally,” Filabi says. “You’d be surprised how many business schools don’t put a heavy focus on ethics in their curriculum, and I think The College has the chance to be a guiding light in business education because of it.”
Trust as a concept is fundamental to human existence, especially when it comes to other humans: if we didn’t have a basic expectation that our fellow drivers would obey the rules of the road, for example, we’d never be able to drive well ourselves. This means ethics, as the foundation of building trust, must be equally fundamental. “When we interview people, we often hear them say they used to be more trusting, but now they’re not, and they’re sad about it,” Oshana says. “It’s elemental to want to have more trust because we need trust to survive, and that goes for organizations and people. Hearing they’re sad about losing it makes me hopeful they’ll want to rebuild it.”
Phase one of the Center for Ethics in Financial Services’ study focused specifically on financial services leadership, and phase two looks specifically at consumers. Through a combination of a nationally representative survey, focus groups, and one-on-one interviews with a mix of people across gender identities, race and ethnicity, and income levels, the Center determined that a sense of trust and an authentic personal connection between companies and advisors and those they serve is of critical importance. “Among consumers, we’ve seen they don’t always differentiate between brands and corporations in financial services,” Filabi says. “They see the industry as monolithic, and there’s a disconnect between their understanding of how it works; if companies are doing well, they must be taking advantage of consumers, and therefore, consumers can’t be doing well.”
Oshana says change on this front needs to start with CEOs and business leaders recognizing the trust problem in their own backyards. “Often in our interviews, we hear people at the top acknowledging that trust is an important issue, but the problem isn’t their company—it’s someone else’s,” she says. “They need to realize it can happen even within their business.” She also notes that people often hold financial services companies to a higher standard of behavior than other businesses. “We’re dealing with people’s investments, retirement, mortgages, and lives,” she says. “Having friendly employees and treating all people fairly is a start, but that doesn’t build trust alone. Building clients’ wealth, keeping promises to them, and delivering results while maintaining ethical standards is the key to progress.”
Much of these principles of trust can be seen in the upcoming phase three of the Center for Ethics in Financial Services’ trust study: stakeholder mapping. Filabi says an exploration of the term “stakeholder” and how it accompanies and parallels the more familiar concept of “shareholders” in business culture is at the heart of the Center’s work. “In the old days, the economy was all about shareholder capitalism and maximizing profit,” she says. “A company’s goal was usually to create a product and sell as much of that product as possible without an emphasis on innovation. Now, consumers are becoming more discerning, and they expect change and evolution in their products and services to stay relevant and useful. They want a voice in the decision-making process. We’re seeing that focusing just on pleasing shareholders is shortsighted, and it doesn’t benefit the company or society in the long run. Companies, including those in the financial services industry, need to start thinking about taking their consumers—the other stakeholders—into account to build trust and affect real change.”
That trust, says Filabi, starts on the individual level, with advisors, senior leadership, and other financial professionals agreeing to abide by their own codes of ethics, and companies policing themselves more effectively. “Consumers are seeing the connection between how companies treat their employees and their clients,” she says. “How companies react to their employees speaking up about concerns within the organization matters.”
Oshana says the Center for Ethics in Financial Services’ research links competence, authenticity, and credibility as important ingredients of building trust in financial services. “Of course, it’s important to consumers to be treated well by people working for the companies where they put their money, but they also don’t want that treatment to be based on high fees or excess compensation,” she says. “Capability and integrity need to go hand in hand, and most people we’ve spoken with agree that compensation should be based on performance.”
In this way, Filabi and Oshana see their work with the Center for Ethics in Financial Services to be vital in supporting discussions about ethics and building trust in the financial services industry, and spreading the word about The College as a champion of business ethics and a trusted name among professionals and consumers alike. “The COVID-19 era has seen decreases in trust across all kinds of institutions, and advisors and clients often seek an external trusted resource, where they can get information and acquire knowledge,” Filabi says. “The College is an ideal third party to collect, vet, and share that information with everyone so that all can benefit from it.”
As they work to raise the profile of The College and its culture of ethics both inside and outside of the financial services industry, the leaders of the Center for Ethics in Financial Services see opportunities everywhere, despite the challenging landscape of today—and their strong, close-knit bonds as a team, built on mutual understanding, respect, and trust, make it easy to see why.
“People often think there’s no reliable way to demonstrate ethics, but actually there is,” says Oshana. “For example, the accreditation The College has as an educator is just one of those ways, and it shows we have the best interest of our students in mind as they go through our programs.”
Filabi adds, “We have the opportunity to make a nebulous concept like ethics more tangible for consumers, individual advisors, and business leaders to speak about it more effectively and make society as a whole better. I can’t imagine a mission of greater import than that.”
The Center for Ethics in Financial Services works to expand its reach through leadership workshops with companies and by word about how financial services businesses, leaders, and advisors can put the principles of ethics and trust into practice for the benefit of themselves, their clients, and society.
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