Andy Agathangelou: If you take trust and confidence out of financial services, what have you got lef

Andy Agathangelou is the founding chair of the Transparency Task Force, a campaigning community dedicated to driving up the levels of transparency in financial services.

Andy started his 30 year career in financial services in retail finance in 1986. After experiencing periods, when, as he’ll admit, he was embarrassed by the sector due to the actions of what he has called a “mischievous minority”, Andy developed an interest in transparency, and a passion for rebuilding trust and confidence in financial services.

I was lucky enough to interview Andy earlier this year, and in the first part of the interview, we got into some detail about the valuable work of the Transparency Task Force.

SW: For the uninitiated, what is the Transparency Task Force?

AA: In many ways, the Transparency Task Force kind of happened by accident. I gave a speech at a special meeting on the 6th of May, 2015 at Senate House, London University and the speech was to a room full of financial services people and it was all about the idea that finance is profoundly important to the well-being of society, to economic stability, political stability… but also that the finance industry has to be trustworthy for it to function effectively.

I spoke from the heart and explained to the audience that, very simply, we can’t rely on the regulators and government mandates to get the industry to behave properly. We have to actually fix it from within… so it was all about the idea of like-minded people within the financial services finding ways to work together to drive positive, progressive, and purposeful reform.

SW: Charlie Munger once said “never, ever think about something else when you should be thinking about the power of incentives”. In your experience, how important are incentives in the investing industry?

AA: Incentives are extremely important. My favourite Charlie Munger quote is “show me the incentives, and I’ll show you the outcome”. There’s a lifetime’s wisdom in that.

There’s a lot wrong with financial services, there’s a lot that needs to be changed, and a lot of it is down to the way incentives almost encourage short-termism, profit-before-principle, conflicts of interest, etc. And the Transparency Task Force is embarking on a major international project at the moment, where we’re looking at some of the underlying reasons for some of the distrust that’s out there. Without a doubt, a big part of it is about alignment of interests, or rather the lack of alignment of interest.

SW: What is the project called? Could you briefly sum up the drive of that project?

AA: It’s simply named after the key question we want to respond to, which is “How can we accelerate the rebuilding of trust and confidence in financial services?”.

The driver for it is that we have an industry which is completely dependent upon being trusted. If you take trust and confidence out of financial services, what have you got left? Not a lot. Despite the importance of it, there has never been a co-ordinated, cohesive international project to attack the trust deficit head-on. Until now.

It’s a profoundly important question that we’re trying to answer. So important that we’re very confident that we can bring together all the key stakeholders, by which I mean politicians, policymakers, regulators, trade bodies, professional associations, practitioners, market participants, thought leaders, and civil society leaders.

We’re running events around the world; and we’re recruiting the best, in terms of different industry disciplines. We have a five-year project where we’re going to be creating a number of work streams. All that thinking is going to end up in a book, and we’re going to use the book as a roadmap to take us from where we are — very low levels of trust — to closer to where we want to be — an industry that’s actually rightly trusted by the consumer and by the public at large.

SW: How much of the recent discourse in the UK about transparency do you think is down to the work of the Transparency Task Force?

AA: There’s no real way for me to measure what our community of over 550 volunteers have achieved in terms of outcomes. So, I’ll point to the facts: the facts are that we’ve responded to dozens of consultations, we’ve had extensive dialogue with all of the regulators, we’ve run numerous events in the UK and overseas about issues relating to transparency, opacity, driving financial reform and so on.

The feedback I get is that we’re trying to do something which is really worthwhile. We’re certainly trying very hard to make a difference; we’re going about it in a collaborative, collegiate, co-operative, and consensus-building way. So, we’re trying not to upset too many people on the way. But we can stand up for ourselves as and when we need to, to make sure that the industry doesn’t get away with being too overtly opaque.

Everything we do manage to achieve will be down to one thing: and that’s the input of a group of people who are acting on a voluntary basis. People that would rather stand up than stand by. People who understand the difference between opacity and transparency, and right and wrong. People who understand the importance of putting the client at the epicentre of everything we do. These are people that I feel very proud and very privileged to work with and alongside, and I’m just making sure that I try to do my bit in facilitating good, open, honest dialogue internationally.

SW: Increasingly the Transparency Task Force is looking beyond the UK; what are you doing in other countries?

AA: After our very first symposium on the 7th of October 2015, I had the pleasure of a conversation with Tomas Wijffels, who is the senior policy adviser at the Dutch Association of Pension Funds; and, over a pint of beer or two, we cooked up the idea of having an international best practice team. The purpose of the idea of that team was to accelerate the rate at which we can transfer best practice around the world.

And the idea of that global transparency team took off pretty quickly. In fact, it grew so quickly that we’ve had to break it up into four groups: so we now have a Team EMEA, a Team APAC, a Team Americas, and the fourth is Team GTI (Global Transparency Index). We’re developing an index to compare / contrast the levels of transparency in different jurisdictions around the world.

So, in total, we have about 150 people outside the UK who are active members of the Transparency Taskforce community; and, within our population of members as a whole, we now have well over 80 ambassadors, who are high-profile thought leaders who are happy to stand by the Transparency Task Force brand and show their support for what we’re trying to do.

What this means is that, in 2019, we have symposia happening right around the world — from Melbourne, to Zurich, to Paris, to Frankfurt, to New York, to Boston and so on — and what we’re basically trying to do is to round up all the progressive people who have that “stand up rather than stand by” mentality, and it’s a very, very exciting journey.

We’re getting wonderful feedback about the approach. It seems that there’s a real appetite for change now: it seems like the pendulum is swinging back towards where it needs to be. People are recognising that it’s all about having a principle-before-profit mindset. And the commercially savvy individuals and organisations are those that understand that transparency is a commercial virtue, trustworthiness is a commercial virtue. So some people are responding positively because they see a sense of altruism in what we’re doing… others are simply looking at it as business people: it makes complete commercial sense to be transparent, truthful, and trustworthy.

SW: Internationally speaking, which countries are leading the way in terms of transparency, and which are kind of dragging their feet?

AA: I think four parts of the world come to mind when thinking about the comparison around the globe. Certainly the Dutch are great when it comes to transparency, particularly around costs and charges. They’re very much ahead of the curve: much of what we’re doing today in the UK is based upon what the Dutch have been doing, so they (quite rightly) are, I think, top of the apex or top of the tree, as far as that’s concerned.

The Nordics are particularly strong when it comes to transparency around ESG issues, sustainability, climate change, and so on. The USA is interesting. The USA is pretty much behind the curve; they have such a terribly fragmented regulatory structure. There’s quite a bit of what we would call regulatory capture: Wall Street controls what happens in the USA and, in some ways, the regulators are responsible for making sure that they don’t upset Wall Street so much. There’s an interesting tension there.

Canada is interesting as well: levels of trust in Canada are very high — higher than they perhaps should be — mutual funds and banking in Canada is far more opaque than it ought to be, but they’re nowhere near as bad as parts of South America, for example. Cuba, Colombia, and places like those have terribly opaque systems where the public, quite frankly, are being ripped off left, right, and centre, as a consequence of the opacity around costs and charges. They’ve got a lot to catch up on.

SW: How hopeful are you that we’ve turned a corner on transparency?

AA: I think there’s been a bit of a zeitgeist blowing through for the last few years around transparency. I think there have been some wonderful individuals — such as Dr. Chris Sier, Gina Miller, many others — who, for a long time, have been doing some wonderful campaigning, for sure. As a result of their work — as a result of the good concerted effort by the regulators — I think transparency is high up on the agenda of the market as a whole.

And there are many organisations that are really embracing it, that don’t see it as a threat: as I said, they see it as a commercial virtue. So, we’re definitely on a journey. The direction of travel is very, very encouraging, indeed. We can’t be satisfied, though, until a member of a trustee board or an individual consumer can simply refer to one simple number to really understand the overall costs being incurred on their investment. Only then will we have true comparability, and that’s where we have to get the balance right between lots of raw data entering the marketplace and having enough data presented in a clear and intelligible way, so that consumers really understand what it actually means to them. We’re getting there.

Thanks to Andy for the interview. For those readers who don’t know him, I can attest that Andy is as friendly and open an individual as you could wish to speak to - so, particularly if you’re interested in transparency, I’m sure he’d be pleased to connect with you.

In part 2 of the interview, we discuss the argument that too much transparency can confuse consumers, as well as the investment consultancy sector, and ESG investing.