Industry specialist questions finance industry fit for purpose

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A paper by David Pitt-Watson and sponsored by Pension Insurance Corporation,‘The Purpose of Finance’, shines a spotlight on an industry where ‘……many of its activities fail to achieve the purpose that they could and should be pursuing.’

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The paper determines the four purposes of the industry to be:
• Safekeeping of assets
• Facilitating payments
• Risk mitigation
• Intermediation

…..and points to the lack of attention to these fundamentals by government and regulators – frequently diverted by secondary issues such as the promotion of trading and corporate governance.

The paper concludes: ‘If we take the four purposes of finance seriously, it is clear we could design better institutions and therefore much better products to deliver upon them. It’s a challenge, but one where the prize is significant enough to justify the effort. We hope that the finance industry, regulators and policymakers will rise to meet it.’

UKSA has for many years campaigned against the fundamental weaknesses identified in the paper and promoted the role of the individual in balancing the self-interest of the industry - notably in its booklet ‘Responsible Investing’ now seven years old and sadly just as relevant as the day it was published.

David Pitt-Watson is a leading thinker and practitioner in the field of responsible investment and business practice. He is currently Executive Fellow of Finance at London Business School and a former board member of Hermes Fund Managers.