INSIDE VIEW: The happiness alpha

Rachel Treece, who heads a training and coaching firm, says anyone who questions financial services’ readiness for cultural change needs to wake up.

Back in 1948, it was considered acceptable to smoke on planes and smoking was considered a healthy pastime. Then the paradigm shifted.

Historically, we managed social and environmental factors as risks to commercial profitability. Maximising profit was perceived to be corporate decision-makers’ top priority. This matched shareholders’ perceived objectives, described by economist Milton Friedman in a 1970 article for The New York Times Magazine as being “to make as much money as possible while conforming to the basic rules of the society, both those embodied in law and those embodied in ethical custom”.

Time will only tell if Larry Fink, the CEO of the world’s largest asset manager, BlackRock, is the man to create the beginning of the tipping point, a change in paradigm. He sent a stern message to corporate executives: “Demonstrate that you’re making positive social contributions or risk losing BlackRock’s backing.” Fink’s warning could upend how businesses measure success, writes Ross Baird, chief executive of Village Capital, on ImpactAlpha.

The truth is, there needs to be a radical transformation in the financial services industry. Full stop. Point. Punkt.

Why do I make such a boldly assertive statement? Because I, like a growing number of others, firmly believe that financial services companies will only achieve long-term sustainability if they recognise and act upon the sea change that is digitalisation, the changing demographics of their workforce and the fact that the industry still hasn’t quite managed to shake off the images of fat bonuses, scandal and unethical or uncaring behavior, not only to investors, but in many cases to their own employees.

Even many of the initiated seem to lack the understanding on how this is put into action. On picking up brochures on socially responsible and ethical funds, I like to go to the back page. “Yep, here we go again…. a distinct lack of diversity… again.” I admit to getting cross about it as non-millennials continue to use outdated means to communicate with clients and their workforce.

It seems to me like the industry desperately wants to change, wants to be happy, but does not know how to do it.

Whilst agreeing to talk at a conference to promote the future vision for human resources, the organiser patiently listened to my passionate oration and, without blinking an eye, said: “It is without doubt, Rachel, that financial services is the sector that needs this the most, but are they ready?”

I paused, listened and wondered.

My own journey and passion for changing the way financial services companies operate came from personal experience. I’ve seen it all: the good, the bad and the downright ugly. I’ve seen the burnout in asset servicing, where sweatshops and Victorian management styles are widespread. These injustices are largely stigmatised and not reported in the media due to fear and a misconception that these victims are able to fend for themselves.

This ‘approach’ not only negatively impacts the individual but the organisation also suffers with lower engagement, reduced productivity, increased turnover and a corporate culture that results in regulatory fines, damage to brand and a downward spiral in talent quality.

I decided I wanted to make a lasting impact on the industry and I found comfort that I am not alone.

At last, after more than 25 years in the financial services industry, I can finally see movement in the right direction. My passion for making financial services a better place helped me to stumble upon some brilliant people that are driving this change.

Jim Ware, Keith Robinson and Michael Falk, the authors of Money, Meaning, and Mindset: Radical Reform for the Investment Industry, argue that diminishing margins will force industry leaders to include more purposeful values.

The legendary Ware, from the Focus Consulting Group, in my opinion has done the most to improve the culture of financial services companies globally. He says: “Alpha is shrinking — it’s harder and harder to find, and trust in the industry is low (as measured by the Edelman Trust Barometer). We hear from our clients that there is anxiety about ‘Well, what do we do in this new environment?’ We say, in order to succeed, firms must define a compelling purpose.”

Author and optimist Simon Sinek has more to say about purpose. “People don’t buy what you do; they buy why you do it. And what you do simply proves what you believe.”
Sinek, for the few who don’t know, rose to popular fame when his video on millennials went viral in 2017. He claims that 90% of employees globally are disengaged because they are not clear on their purpose, and he passionately wants to reduce that statistic.

Nicolas Crochet, Patrick Somerhausen and Marc Verhaeren, the founders of fundsforgood, are leading the way forward in this transformation and are a rare example of a financial services organisation that has a true purpose and belief. Having worked for over 20 years in investment management for leading fund managers, Crochet quit and spent time working with refugees and other disadvantaged people. Moved by this experience, he created fundsforgood with a simple premise.

He said: “I wanted to give 50% of our profits to help create a sustainable future for our society. Our business model permits micro-financing and coaching jobless people in Europe who would not normally get access to credit to fulfil their entrepreneurial dreams and wishes through interest-free loans.”

George McKay, co-head of Allianz Global Investors, is very clear about his own legacy and purpose: “Over the long run, fostering a positive culture is essential to a company’s ability to create client and shareholder value. For this reason, we have invested significantly in developing the corporate culture at Allianz Global Investors, which is based on shared values and a common purpose, and where we are clear on the performance and behaviours we expect and how these should be recognised.”

Ware, Robinson and Falk’s book is brilliant. A compelling read. The truth. And yet, as Ware says, many financial services companies have been built on a culture of “money, status and beating others”. But this doesn’t have to be the case.

Hedda Pahlson-Moller, a prolific and inspiring social impact investor, suggested we create a social media movement called #impactimperative. Let’s bring together a group of like-minded people globally who are united in making an impact in financial services.

So, the question to you is, is your financial services company ready?

Join us #impactimperative

Rachel Treece is the CEO of fts global

©2018 funds europe



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