By Cora Pettipas
“On a withered tree, a flower blooms” – Shoyo Roku
With the best interest standard being hotly debated for financial services, along with other recent events and changes in the exempt market, I have been thinking about this line, of how on a withered tree, a flower blooms.
It is not difficult to engage with others about the problems with Advisors, the problems with compensation, the problems with industry, and all other sorts of negativity. If you look at industry or mass media press, this negativity is often amplified and exasperated. The Wells Fargo account scandal in the Wall Street Journal is a recent example, as it was seen as the downfall of the last ‘esteemed bank.’ Since 2008, regulators internationally have been trying to crack down on bad industry practises, making it seem as if dishonesty and unethical practices are the norm. However, out of the financial industry’s real and perceived dysfunctions, our industry was born through innovation.
All that we keep hearing is ‘the problem is...’ pertaining to financial services. It is assumed that individuals take the fast way, the easy way, and the most profitable way, without observation or respect for long term consequences. This is not what I see. There are those sorts that get us all painted with a bad brush, but I see individuals who want to sleep at night with a clean conscience, and do their very best to attract and retain their clients. They add value and seek out opportunity anywhere they can, and they are the true leaders of our industry.
Since no one else seems to be saying it at this time, this note is a reminder that the exempt market is an important part of the financial services industry. Yes, financial services, from Advisors to the public markets, are getting full criticism from national thought leaders, and hopefully there will be some constructive outcomes and innovations out of that.
However, only six years old in its current form, the exempt market is growing faster than ever before and is an essential place amongst our currently dysfunctional capital markets to raise money. It is also an essential place for investors, among the prolonged low yield environment to grow their nest egg.
With the central banks’ key interest rate staying at historically low levels for the foreseeable future, following the international trend, the exempt market is the only shop in town offering acceptable yield to investors. To attain investment goals, investors have the options of saving more, working longer, or changing their investment strategies. Many investors are choosing the later, and therefore more and more Canadian investors (who generally tend to be risk adverse) are looking strategically at what alternatives private investments have to offer to attain a yield boost on a portion of their portfolios.
The exempt market has seen a great deal of recent success, investor interest is growing, new and innovative products are being developed and funded, private investments are becoming more popular, and the industry is now getting regular national attention. These are all very positive things, as there is a real need for what the exempt market offers, both for investors and the business they fund.
It is true, our market is not perfect, and we have had some disheartening failures, but that is not a reason to dissolve our focus into the seemingly ever constant blame and finger pointing that encompasses the financial services industry today. It is not productive. Moreover, it takes away the efficacy of so many: from issuers, EMDS, advisors, and service providers that do excellent work in our space.
It is from these individual efforts of excellence that our industry will flourish, that we can remind ourselves that we do important work, fundamental for wealth building and for the capital markets, and that there is dignity in that.
In the coming year, NEMA will continue to assist members and industry so that our purpose and our function can continue to grow and have positive effects. We hope you enjoy this issue of the Exempt Edge, and feel free to reach out to us at any time, as we are the voice of the exempt market.
As an industry I suggest we not dwell on current problems, but on the solutions we can action now for the future – as that is where our industry will live, grow, and thrive.