At the root of Wall Street's recent failures was something the financial industry lost along the way, says John G. Taft, great-grandson of President William Howard Taft.
Integrity. Accountability. Service to others.
"We have a culture problem," said Taft, CEO of RBC Wealth Management, among the largest brokerage firms in the United States. "The culture of Wall Street has been broken. And it hasn't been fixed yet."
Taft's comments came during a visit to Duluth on Thursday to give the keynote address for a Scottish Rite of Duluth event.
At the core of the financial crisis were actions by leaders of big financial institutions who had lost touch with their stewardship mission, purpose and values, he said.
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"The financial services industry should be a means to social ends," said Taft, who lives in Minneapolis and Montreal. "It should not be an end onto itself. It should be about serving the needs of clients."
Taft, 57, should know.
He successfully led RBC through the economic recession when the market plummeted and banks failed. He has served as chairman of the Securities
Industry and Financial Markets Association. And integrity and stewardship are his family's legacy. Besides being the great-grandson of William Howard Taft, president from 1909 to 1913, he is the grandson of Sen. Robert Taft.
Leaving the world a better place has been his family's guiding
principle, he said -- but it's one that much of the financial industry has forgotten.
Instead of looking out for the best interest of clients, many were looking out for their own best interests, Taft said.
But it wasn't always that way.
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"The thing that breaks my heart is right now the public perception of our industry is as low as it's ever been," he said. "Now we're down there with
politics and journalists, and that's not good."
Taft is on a campaign to bring the industry back to its roots,
managing clients' finances with their goals and best interests in mind. To that end, he's working to boost fiscal responsibility and strengthen banking regulations through efforts to rewrite the rules under which the U.S. securities industry operates.
"It should be an agent or a means to improving society," he said of the financial industry. "We should be better off as a society. With a financial system, we shouldn't be worse off. The problem is, ask most people and they would say they're worse off."
He said he believes operating to improve clients' lives -- combined with an eye to how investments impact others, societal problems, the environment and future generations -- would not just reform the financial system. In time, it would lead to responsible companies outperforming those that don't operate responsibly.
That's why he wrote "Stewardship: Lessons Learned from the Lost Culture of Wall Street," published this year by Wiley Press.
In it, Taft argues that service to others and acting responsibly can stabilize the financial system, improve it and minimize future financial crises.
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He sees hope in the growing trend of stewardship investing, the strategy of investing in companies with high environmental standards and that help improve society.
In keeping with his philosophy, he is donating all proceeds from the book -- which retails for $27.95 -- to charity.
