John Taft wants to encourage private investors back to the market
The financial market meltdown in 2008 begat regulatory reform in 2010 and John Taft, newly named chairman of the Securities Industry and Financial Markets Association, says he stands ready to help the government get it right.
In particular, Taft is concerned about the departure of individual investors from the stock market. ‘In the wake of the financial crisis of 2008-2009, individual investors saw their portfolios decline precipitously in value without regard to the investment strategy or asset allocation they were following,’ he tells IR magazine.
Ensuing ‘financial market aftershocks, such as the flash crash last May – which saw computer-driven trading whipsaw the market – and ongoing debt crises roiling Europe have increased individual investors’ wariness,’ he adds.
As a result, many ‘lack confidence that, if they put money into stocks and bonds, those investments would grow over time,’ Taft says. ‘There is no one thing you can do to rebuild investor trust in the financial markets. In any relationship, when something happens to breach trust, it takes time and numerous actions… to build trust back.’
Taft believes getting regulatory reform right is a key part of restoring confidence in the market. He is most concerned that regulations get written in a way that ‘strikes the right balance’ on the way to achieving safer markets and avoiding another financial meltdown. ‘If you don’t have a financial system that promotes economic growth, assets will not increase in value,’ Taft notes, adding that this would erode investor confidence further.
In addition to regulatory reform, Taft says ‘the financial markets need to settle down. And that has happened to some extent since the spring of 2009. We’ve had a remarkable recovery with some spurts of volatility.’
One aspect of Dodd-Frank he is most familiar with – rewriting the ‘the fiduciary standard of care’ for all investment advisers – is of particular concern. Under Dodd-Frank, the SEC has to write ‘nothing short of a complete overview of the personal investment advice industry’ in five months, Taft notes. Without help from the industry itself, the SEC will not be able to ‘address all the issues,’ he concludes.
