In this age of rising populism and partisanship, the value of expertise and institutions increasingly is under siege. And that trend threatens economic growth and financial services industry policy, not to mention the long-term health of the investment business.
The past couple of years have been witness to an increasingly poisonous political environment marked by intensifying partisan rancour and populism – most obviously in the U.S., but also in other parts of the world, including countries in Europe, Asia and South America and, on a smaller scale, in Canada.
At the global level, this tide already has sparked a damaging trade war, crippled the U.S. government, spooked investors amid threats to central banks’ independence and rapidly escalated fears of further geopolitical instability. The result is rising uncertainty about financial markets and the economy.
In Canada, some of these same ideological tides have arisen in Ontario, where the provincial government’s appetite for political meddling, score-settling and high-handedness has torpedoed a multibillion-dollar transaction in the hydro industry amid fears of further political interference. And as the Canadian Securities Administrators’ (CSA) just-concluded consultation on proposed regulatory reforms in the securities industry shows, the Ontario government’s erratic approach not only is undermining the independence and integrity of industry regulators, but is shaking investor confidence in the system overall.
Retail investors are growing increasingly disillusioned with both the investment industry and the regulatory and political institutions that are supposed to ensure fair and efficient markets. If investors come to perceive that they’re being abused and exploited by the industry, that policy-makers are captive to commercial interests and that “the system is rigged,” as one investor’s submission to the CSA says, investor confidence also is at risk of crumbling.
In the face of this threat, the industry should – if only for the sake of self-preservation – stop clinging to the past, shelve its short-term self-interest and embrace efforts to put retail clients truly first.