Aretha Franklin Died Without a Will, and Estate Issues Loom
Quick Profile - Peter Sobels, FSC Conference Speaker

Quoteable from Day Two of the FSC Conference

Adrian Orr – RBNZ

“Proud of my first on-the-record speech… which is why I am not going to read it, you can go and read it, and I will talk about something else”

Orr proceeded to talk about the global economy, some of the big issues, and the role of financial services companies. That included a powerfully succinct description of what almost every financial organisation does in some way:

“Identify a risk – ooh, look at that -  price a risk – ooh can’t afford that – and then allocates the risk – then the right person takes on the risk or manages it… without those we have gaps – unidentified risks, risks that are not properly priced, and therefore not efficiently managed. So, we get ups and downs, surprises, and shocks: like wars, crashes, and environmental issues like global warming.”

Orr’s big worry list included the reducing returns to labour, about concentrations of companies (fewer larger businesses) and those that have large intellectual property entitlements – hard to compete away and so on. He then moved on to a principal and agent concept discussion – as part of the thesis on the short-termism. Most people are focused on short-term incentives, and that creates externalities – like those listed above. He pointed out mis-pricing water resources and 'calling it the dairy industry'. Laurence Kubiak explained that more technically:

“We have great factor endowment for agriculture… but this is our problem zone for climate change – we rely on those industries”

All of that was the platform for moving to a conversation about conduct issues. Naomi Ballantyne supported the need for conduct regulation that set rules for

"some things that you have to demonstrate… including your value proposition for your longest held customer, how you look after your lowest paid employee… how we support people to speak up when they see conduct problems.”

Also adding:

“I don’t know how we regulate for long-termism, but I know that we can ask companies to report on more issues and over a long-term…”

This got spontaneous applause, but Adrian Orr felt it was not thunderous enough, and asked us to applaud again, and he proceeded to endorse the comments. Although later he did add that insurers shouldn’t be offering overseas trips as incentives. Taken together, Naomi Ballantyne’s comments, and Adrian Orr’s give four suggested corners to conduct regulation:

  1. Look after legacy – that’s the value proposition for the longest held customer
  2. Look after the lowly – that the support you offer to your lowest paid employee
  3. Listen to conduct questions – wherever they come from, and often service staff and customers who ‘don’t understand’ the business may see more clearly than people soaked in the business
  4. Incentives matter – and excessive incentives should not be used – as they have conduct implications

I am sure more can be added, for my money, these two would come in:

  1. Be certain of suitability – don’t let people buy the wrong thing, but carefully allow room between conduct and financial advice – the two are different
  2. Address information asymmetries

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