Transparency, Innovation, Education
I was watching a documentary the other night about Ralph Nader called An Unreasonable Man. Despite the fact that Nader was never elected a politician, he has been incredibly effective in implementing policy. Some of his efforts include:
- Mandatory seat belts in all vehicles
- Airbags
- Warning labels on cigarettes
- The Clean Air Act
- The Freedom of Information Act
Regardless of your political stance, we can all recognize that Nader has done a lot for our country. The movie got me thinking about how our community needs a well-defined purpose and direction. We need to believe in principles and work together to achieve them. I thought about it for a while and in what could only be described as an epiphany, it hit me. I was suddenly exhilarated! I leaned over to my wife Jenny, and asked her if she would indulge me for a second to see if my idea sounded remotely sane. Here’s my challenge for us:
The financial industry is in a state of transition. What is our opportunity at this point in time? I believe we can reshape our belief system.
This industry, very simply, needs to enhance three areas:
1) Transparency - At the heart of this crisis is the need to maintain an open and honest discussion among ourselves and with our customers. You should be credited for the willingness of your institution to share and contribute. This sharing can be done from the bottom to the top of the organization. Anyone has the right to help carry this movement forward and your voice is needed to do it.
2) Innovation - Innovation is something that gets a lot of talk but not a lot of action. Part of this is due to constraints put on the institutions by regulators but also by the organization itself. Innovation is often passively talked about, but seldom made a priority within an organization. I suggest a mandate encouraging innovative practices for banks and credit unions. One way to do this is to have something similar to the R&D tax credit allotted to small businesses. Allow financial institutions, large and small, to get credit for taking a chance. If banks aren’t enabled to think and play creatively, a stagnant environment will exist. Innovation can root from an individual or an organization. The question is, what are you going to do to improve things?
3) Education - Some consumers worry that they won’t get sound financial education from financial organizations, and in current times are timid to leave their money in a bank. We need reform that allows - no, requires - bankers make available a certain level of financial education to their customers.
Individually, each step is crucial, but only when the three ideas are ‘tied’ together, do we attain transformational change.
This is how the TIE principles were born. It’s about making a difference and taking a stance against complacency. What changes can you and your institution make to encourage these principles? How about becoming a little more open to sharing ideas with others? Or testing a new marketing initiative toward a particular demographic? Are you willing to host financial literacy classes at your local schools? The power is in your hands.
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February 26th, 2009 at 1:20 am
I applaud you for your idea for an innovation tax credit for financial institutions! Think of the benefits for the consumer if positive financial innovation was to be encouraged. The next decade should encourage financial innovation that aims to benefit the retail and commercial customer.
Let’s make it our duty as bankers and Americans to encourage innovation in the financial services industry. Let’s make sure that our banks remain competitive in the global marketplace though continuous improvement in customer service and satisfaction. Let’s encourage innovation that links the organizational goals, performance-based compensation, and long-term stability.
Let’s do all of this and more. At this point, we have so much opportunity ahead of us; it is time to seize it!
P.S. Bank of America already hosts financial literacy classes at local schools though volunteer efforts of generous employees!
February 26th, 2009 at 4:46 am
Wow, i like this idea. This takes me back to square one and makes me put the thinking cap on in terms of what is the basic purpose and function of a bank, in all the changes are we still strong with the real fundamentals, what is it that is causing the indigestion, etc etc. Similar to the ideas related to health and safety what is it that requires from banking and financial services point of view. One i can think of is risk sharing, and communication of risk. Engineering products that are based on the principles of risk sharing and communication of these risks in easy to understand manner to the customers.
February 26th, 2009 at 5:41 am
i propose a fourth principle. Fiduciary.
banking (and credit) circulation is so crucial to the vibrancy and resiliency of our (global) economy, financial institutions which deal with consumers should regard themselves as fiduciaries and be held legally to a fiduciary standard of care.
a delineation similar to ‘accredited investor,’ could be fashioned so that dealings with ‘accredited consumers’ could remain caveat emptor, arms length, transactions.
March 4th, 2009 at 6:12 pm
I like your approach to obtaining a transfomrational change in the financial services industry. However, I think you put equal weight on each step when, in fact, I think one deserves more focus that all others: Education.
I teach a weekly class to middle and high school students on basic money and banking principles. Frankly, financial innovation, has been too much of focus these last 10-15 years, and it is why we find ourselves in the midst of the greatest financial crisis since the Great Depression We need to step back and focus on the basics. Educating our youth on money seems trivial in the grand scheme, but it’s the only way to establish a solid foundation for understanding the needs of our future banking clients. I can’t tell you how inadequately prepred most students are when it comes to basic banking principles. For example, understanding the difference between a checking and savings account. How about creating an online FLASH based application describing the differences, educating student/clients as they make the choice of selecting the right account for them.
Whatever you guys come up with, let’s not forget that banking is one of the oldest professions and has survived cataclysmic like events in the past. It’s still around today because saving, lending, and investing are simple concepts that first graders are able to comprehend–I know because I teach them.
March 9th, 2009 at 4:35 pm
I applaud the comments around education. The challenge is to make banking overall less intimidating. As you look across all customer segments and delivery channels, there is not one group that has mastered the language of banking. The indudstry created alphabet soup of banking (i.e. APRs, CD, IRA’s) needs to be retired in exchange for what is important to each individual. A segment of one may seem very hard to educate, but if we can focus on the current and future goals of each customer and make it relevant to their everyday life, we will find that we have begun a true banking transformation and move away from the commodity based transaction model.
April 1st, 2009 at 3:15 pm
Hi everyone,
Thanks so much for the feedback and I’m glad this post resonated with you. Our community has gone on to even do a video in regards to these principles and if interested. These principles are going to be our communities goal moving forward.
We’d love to have you join the conversation and I’d like to thank BofA for allowing me to talk about something I feel so passionate about.
September 21st, 2009 at 5:17 am
I am going for weekly class on basic money and banking principles. Frankly, financial innovation, has been the most innovative topic. IThis post helped me in my studies. Thanks for that.
September 21st, 2009 at 6:38 am
Great post this morning! I hadn’t heard of this documentary and your opening line really pulled me in so I watched the preview. Looks like a fascinating topic and it has already sparked debate here at work with the folks I pass it on to. So much anger over 2000 and 2004 that folks forget what Nader even was before those elections.