The industry appears disconnected from its purpose, the researchers warn. When asked, a majority of professional investors give their firms low ratings for being able to articulate a clear vision for the future, for being prepared to adapt their vision over time, for being able to talk to their employees about their values and beliefs, and for taking the time to imbue that vision in their employees through teaching and coaching.
Just 15 percent of investment professionals strongly believed that their leaders were able to articulate a compelling long-term vision.
Indeed, out of 13 industries examined for phi, financial services ranked 12th, leading only retail. The industries with the highest phi were industrial production services, infrastructure and technology, and telecommunications.
“When we asked c-suite leaders questions around what is their purpose, there was a great deal of hesitation around answering the question,” Duncan says. “People said that focusing on motivation was not on their to-do list, but motivation needs to be directed because that’s where firms will find superior performance.”
Fender says that the financial services professions should look at it as a “calling” similar to “helping” careers in education or health care.
Asset owners, asset managers and wealth managers all report that certain short-term stresses are driving their decision making. For more than one-third of asset and wealth managers (36 percent), acting in their clients’ best interests implies taking on career risk – these industry participants are expected to make decisions based on clients’ long-term time horizons, but are being assessed base on performance over much shorter time periods.
That means the industry is cognizant that short-term losses may drive investors to terminate relationships with managers, even if they’re benefiting from the management in the long run. Almost one-in-four of the managers (24 percent) feel organizational pressure to take too little risk, and another 25 percent feel greater pressure to simply replicate the exposures of their benchmark, even when they believe they are suboptimal investments.
“When money is on your mind, it does destructive things to your cognitive functioning, it narrows your thought processes so you can’t engage in things like creative and deep problem solving,” Duncan says.
Short-term self-interest often seems to drown out phi when investment decisions are being made. Nearly two-thirds of investment professionals (62 percent) believe their organization acts in its own best interest rather than that of the clients.
Even retail investors sense the prevalence of short-term selfish interests – more than half of the retail investor respondents believed that financial institutions were more likely to offer products and services in the firm’s best interest rather than in the interest of the client. Fewer than one-in-three retail investors (32 percent) attributed their long-term success to an advisor or an investment provider, they were more likely to credit themselves (55 percent) or their family and friends (38 percent).