Team GTI is developing our Global Transparency Index initiative which will highlight best practice in the most transparent countries and allow different countries to benchmark themselves against others.
What’s the problem that we are helping to solve?
Most Governments around the world are encouraging their populations to become increasingly responsible for their own financial security and welfare in retirement and to take upon themselves more of the financial risks of retirement.
For that ‘risk transfer’ approach to be justified to the community and for the transition to be successful, Governments need to know whether their pensions and investment sectors are efficient and adequately transparent with consumers, particularly in relation to issues such as costs/charges, how/where monies are being invested and the true investment performance being achieved.
Financial services regulation is a complex, expensive and resource-hungry activity but new regulations often fail to achieve their full potential. There are many reasons for that. Regulators and policymakers should take more advantage of what has been done in other jurisdictions but there does not yet exist a centralised source of relevant international transparency data to facilitate the comparison, benchmarking and efficient transference of best practice that is wanted.
The Global Transparency Index is being developed precisely to solve that problem.
Several countries have taken significant measures to drive up the level of transparency in their pensions systems and the resultant transparency achieved represents an enormous societal benefit to those countries. They have implemented good ideas that have taken a considerable amount of time, effort and money to develop and their ideas have been fine-tuned in the real world. The knowledge and understanding of what they have done will be an invaluable insight for other countries to benefit from.
Ultimately, the Global Transparency Index will include all countries around the world. It will be produced annually and the very first iteration will be focused on the levels of transparency in the pension systems of the UK, USA, Canada, Australia and the Netherlands, with the intention to expand the number of countries involved year by year.
By producing the Global Transparency Index, we are creating a powerful platform for sharing best practice that will inevitably lead to questions such as:
What are the benefits of our solution?
There will be many benefits to a wide range of stakeholders. The Global Transparency Index will:
What is the proposed approach?
The Global Transparency Index will be a country-by-country assessment of quantitative and qualitative research data that will form the basis of a ranking system. The countries with the most transparent pensions systems will be at the top of the list and the least transparent countries will be at the bottom. The approach is straightforward:
Summary and next steps
The Global Transparency Index has the potential to deliver real, practical benefits to a wide range of stakeholders around the world and contribute to much better transparency in financial services. We believe this will lead to greater trust of the financial services sector as consumers will feel like they are being told the whole story.
We are looking to design and build the Global Transparency Index in such a way that it becomes a unique and invaluable resource for regulators and policymakers. In the planning stages of the Global Transparency Index we are genuinely keen to take on-board ideas and preferences from all stakeholders to optimize the value of the Index.
You can view the members in Team GTI and all our other Teams, and our Ambassadors by downloading the spreadsheet that you can access through this link; scroll to the bottom of the page.
If you would like to contribute to the discussions taking pace please connect through
The Great Divide
You can read the speech by Andrew G. Haldane, FAcSS (the Bank of England's Chief Economist and Executive Director of Monetary Analysis and Statistics) that he gave on 18th May 2016 at the New City Agenda Annual dinner.
The speech is entitled The Great Divide and it is a first class explanation of why the trust deficit really matters and why it makes sense to try to do something about it.
Please click on the green button to access it; if you're not convinced of its relevance to our initiative, here's part of it:
..."The most important and compelling message the Bank received at the Open Forum came in the first session. The Bank had conducted some polling of perceptions of the financial sector – for example, by asking people what one word best described the future of financial markets. Among the Bank’s usual contacts, including those in the financial sector, the most used word was “regulated”. Many of us will have heard that message from financial insiders concerned about the perils of over-zealous regulators.
For me, the more revealing responses came from the general public, from the customers, rather than the producers, of financial services. The word most used by them when describing financial markets was a rather different one: it was “corrupt”. Not far behind were words like “manipulated”, “self-serving”, “destructive” and “greedy”. I am sure many of you have heard those messages too. They are certainly ones I have encountered frequently on my visits around the country."...
Please click the green button below to access the full speech. If you need to read another piece first, here it is:
..."At least until recently many economists like me, when faced with this evidence, might have shrugged our shoulders. Social capital had no real role in our models of economic growth, unlike physical capital and human capital. Trust did not butter our parsnips and nor did it enter our production functions.
Recently, however, that orthodoxy has changed and the importance of trust has become clearer.
Evidence has emerged, both micro and macro, to suggest trust may play a crucial role in value creation. At the micro level, there is now ample evidence the degree of trust or social capital within a company contributes positively to its value creation capacity.
At the macro level, there is now a strong body of evidence, looking across a large range of countries and over long periods of time, that high levels of trust and co-operation are associated with higher economic growth.
Put differently, a lack of trust jeopardises one of finance’s key societal functions – higher growth.
Those social capital effects appear to be particularly potent when it comes to financial decisions. Evidence suggests that a lack of trust leads people to retreat from the stock market and banks and to move towards cash holdings and informal sources of credit, such as payday lenders and loan sharks. That jeopardises the second key benefit of finance to society – improved risk-sharing by households and companies.
So a lack of trust in finance potentially hobbles both economic growth and financial stability.
That lack of trust is the mirror-image of the perception gap between the financial sector and wider society, the Great Divide.
The Great Divide matters because it signals a pronounced and protracted erosion of social capital. It puts finance on notice for losing its social licence. And, unaddressed, that jeopardises future wealth and well-being."...
Please click on the green button to access the full speech. If you're not yet convinced you should, here's a final snippet:
..." As a survey in 2013 of financial professionals found, rather remarkably, that over half believed their competitors engaged in illegal or unethical behaviour. A smaller, but still high, fraction of 24% believed their own company engaged in such practices. Similar percentages believed their industry did not fulfil its fiduciary function of putting clients’ interests first.
The significance of these findings is not the precise percentages, as striking as these are.
More fundamentally, it is because of what they reveal about finance’s perception of itself, the mirror it holds to the social identity of finance."...
Click onto the button below to access the full speech; you'll be glad you did, it's profoundly thought-provoking for anybody interested in the future of the financial services industry:
If you are not already on the right page and want to read about our major international project to help rebuild trustworthiness and confidence in financial services, click on the orange button below: