The Sorry State of the FInancial Services Industry Shows the Need for Industry Reform

A graph is worth 1000 words, and this graph showing the decline in financial services sector job losses shows the sorry state of the financial services industry.

This decline shows the following:
--The lack of industry leadership and need to realize the need for new innovation;
--The decline in investor confidence;
--The failure of 401(k)s to deliver on their implied promise of providing retirement security;
--The open questioning about the role of capitalism;
--The failure of traditional diversification investment models;
--The need for industry regulation;
--The need for new ways of looking at investing and what it can and cannot deliver to investors.

These are not a "black swan" events. On the contrary, they, and other events, show that a serious restructuring is underway in the way the global economy works, and how these developments have outflanked the traditional investing models used by portfolio managers. All this helps explain dismal mutual fund performance and why the top fund managers simply have no idea of what to do.

Granted a graph is a more artistic representation than scientific, but these job loss numbers are the best graphic representation we have about the state of the financial services industry.

Re-Building the Industry
The most important question is: What can the financial services industry itself do to regain lost jobs?

First, it has to acknowledge the problem

The current financial services industry leadership has adopted the ostrich approach. It is waiting for the long-awaited recovery which will restore all of the old industry defaults to "normal." This explains why the mutual fund industry is strangely silent about what it is doing to regain investor confidence.

Instead, it is terrified of impending new regulations which will cramp their style. It also explains why the mutual fund industry is focusing on preserving the bloated 12b-1 fee structure since that is their lifeline to subsidizing the status quo. This hope is being fueled by people who want to keep their high-paying jobs.

The other way to build a more long-lasting job recovery is to introduce new ways of investing and new business operations with new sales structures, less fat, a realization of what investing can realistically accomplish, and a new focus on the investor.

Only then will the financial services industry job recovery show some long-lasting results.