The Flaws of Finance – What You Should Know About

December 5, 2018
finance

 

Financial services have become one of the most sought after career options for today’s business graduates. Over 31% of all graduates from Harvard Business school entered the field last year alone. The main reason for this influx of recent business graduates into the field is because of the high pay that it offers. One can expect to earn at least twice as much as people working other jobs when working in the financial services industry.

The functions served by the world’s financial sector today is four-fold. Number one is the smooth functioning of all payments systems, which are integral to any economy working properly. Number two is to ensure the smooth transfer of money from people who save it to those who need money either through loans or as part of pooled savings such as mutual funds. The third is stabilising the price of financial assets by investing in markets. And finally, the fourth is to use insurance policies and the like to help people manage financial and physical risk.

While the functions mentioned above are important, other services like power, water, security and disaster services are also at the very least, equally as important. In spite of this, people working in other sectors are paid less and receive fewer benefits than those working in the financial services sector.

The financial sector has had a history of treating its customers badly. We just need to consider the number of scams that have risen up in the industry in the last few decades to understand this. More often than not, we see financial establishments sell products with highly convoluted wording to gullible customers who usually don’t realise what they are getting themselves into. The main reason that instances like this keep happening is due to the fact that there is a huge disparity between those who work in the industry and the customer when it comes to information. As such, those that work within the industry, design any product that they sell to customers in such a way that it maximises profit for the financial institution.

Often, it is not easy to distinguish between a banker profiting due to good investments made at the right time using pure skill, and ones who just get lucky. As such this brings into question the capabilities of ex-financial sector professionals who now hold power within the country’s economy and are in charge of various facets of it. Financial institutions have been known to spend billions of dollars on lobbying various governments and the fact these people have the amount of power that they do almost purely due to them having a huge financial advantage which may have been gained either due to luck or taxpayer subsidies doesn’t really seem like the smartest idea.

As we have seen, the financial sector is rife with some pretty serious flaws. Serious regulation is required to make sure this industry works in a more transparent and customer-friendly manner. Governments and elected representatives must be able to look beyond the financial support they enjoy from such institutions and regulate them in a manner beneficial to all those involved and not just themselves.

Post a comment

6 − 3 =