SIFMA and Main Street Take Center Stage: Chet Helck's Legacy?

One key insight from the research is how investors’ positive views of the capital markets is distinct and separate from investors’ distrust of Wall Street and large banks. Last month’s “Main Street Investor Survey,” by the Center for Audit Quality suggests that confidence in the capital markets had remained fairly steady over the past several years. Further, September’s report from the American Enterprise Institute (AEI) on investor views, “Five Years After the Crash: What Americans Think About Wall Street, Banks, Business and Free Enterprise,” distinguishes Americans’ confidence in business and free enterprise generally, from Americans’ distrust of Wall Street.

Distrust of Wall Street, the AEI report points out, is not new. What is new is that the financial crisis magnified these negative views, making them “deep-seated.” So, “Americans see Wall Street as a culture apart, one that operates by a foreign code of conduct.”  

Harris Interactive has measured corporate reputations for many years and its data may offer insight into what being viewed as a “culture apart” means. Its February 2013 survey measured the reputations of the “60 most visible companies.” Consumer technology companies (Amazon, Apple and Google) rated high, and occupy three of the top four positions, while financial institutions rated low among the sixty firms. Wells Fargo, JP Morgan, Citigroup, Bank of America and Goldman Sachs occupy, respectively, positions 52, 53, 55, 56, and 59. 

Few would disagree that transparency matters. A July 2013 CFA Institute report, “Financial Reporting Disclosures: Investor Perspectives on Transparency, Trust and Volume,” offers new research on investors’ views of the 2008 financial crisis and its aftermath that underscores just how very much transparency matters.

The report discusses the breadth of opaqueness in financial institutions and its impact, associating the five years of “economic uneasiness” following the crisis with high-profile examples where transparency was lacking. Its overriding conclusion: the lack of transparency from financial institutions “leads to loss of investor trust and, in turn, the reluctance of investors to invest.”

Further, some Wall Street executives acknowledge they know what their firms can do to restore trust. The2012 Makovsky Wall StreetReputation Study, which surveyed 150 marketing and communications executive at financial firms, sought to attain industry professionals’ views on the causes of tarnished reputations and what should be done about it. Among the findings, 96% of the respondents say “financial services companies invited negative public perceptions through their actions or inactions.” 

This is a big week for Chet Helck. Washington and Wall Street will be looking closely at SIFMA’s initiative. There may be no more important single action SIFMA could take than to significantly increase transparency around those issues that matter most to investors. Helck might consider what the author of the Harris Report, Robert Fronk, told CNBC, “One thing the public is screaming loud and clear about financial services is: be more sincere, be more honest, be more transparent.”