Don’t grab your Latin dictionaries. That is not an official phrase. It is 100% made up (Copilot said so!). But what I do think is true, is that years in the financial services industry changes who you are and how you see the world, creating a unique subspecies of Homo Sapiens called Homo Financialis. That is now, of course, over and above the fact that these individuals over consume and have a taste for good coffee.
This is not a financial advice piece. You will not find any recommendation on how to save money or where to invest your hard-earned salary here. You will only find some life lessons learned from an industry that have spent years recovering, adapting and evolving.
Lesson 1: Uncertainty is part of the plan
First, the only constant in compliance and financial services is that things change, frequently. So, it is always certain that things are uncertain.
Secondly, uncertainty is not a flaw in your plan, it is part of the plan. Compliance is underscored by evaluating risks and then according to your risk appetite trying to mitigate the inherent risk. But residual risk remains, creating that uncertainty.
Life works very much the same: we know everything is not guaranteed, but we still move forward based on decisions where we can tolerate the outcomes.
Lesson 2: Trust is essential, but it works better with verification
Financial services run on trust. But it also run on verification, segregation of duties, recons, approvals, audit trails and so forth. Controls do not replace trust; it gives it longevity (and less fines!).
The VBS Mutual Bank failure was marked by fake deposits, the granting of loans to related parties, paying of hush money, etc 1. The financial statements were however signed off.
This does not mean no one can be trusted. It just means that an entire system can not rely on one person not being pressured, mistaken, compromised or dishonest. People are fallible.
In real life it doesn’t mean you have to conduct a full audit in order to conduct one transaction. It just means that putting an agreement in writing works better. It means checking that expectations match prevents disagreement.
Lesson 3: Documentation is memory with better handwriting
In a highly regulated environment such as ours, “if it’s not documented, it didn’t happen”. Whether you’re dealing with the Financial Intelligence Centre Act or the Financial Advisory and Intermediary Services Act, record keeping is essential 2.
Record keeping may feel a bit pedantic, but it is only pedantic until memories differ, people leave or circumstances change. We don’t record because we are untrustworthy but because our memories are fallible.
It is also not necessary to record all those cups of coffee we drink. Record what matters and can have a material consequence.
Lesson 4: Small compromises compound
Interest is unfortunately not the only thing that can compound. Making an exception to the rule can also compound. Organisational failures are not usually announced with a group wide memo. They develop through small exceptions. The first exception may be genuinely justifiable. The second exception creates a precedent and the third becomes culture.
The reverse is of course also true: small acts consistently and diligently done over time compounds into trust and relational capital.
Lesson 5: Who is Homo Financialis not?
We take risk seriously. Evidence is important. We like to think that we are rational and consistent. Financial services though ensure that you stay humble. The final lesson (and the most important one): Firstly, rules should make us more human, not more mechanical. At the other end of our rules are people.
Secondly, being a human is also a control. Controls and AI can never replace our sixth sense that something is wrong or there is more to this story than meets the eye.
So let Homo Financialis trend for its slightly different views all driven by good coffee of course.
If your industry also made an indelible mark on you, feel free to contact me and we can compare notes (mmokken@wauko.com; Tel. 021-819 7813), but if you are looking for real financial advice relating to your treasury function, you can call Sean Tweedie (stweedie@wauko.com; Tel. 021-819 7820).
Footnotes
- https://static.pmg.org.za/181107VBS_REPORT.pdf
- Section 22 and 22A of the FIC Act; Section 18 of the FAIS Act.
