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Political and Technological Disruptions Take Center Stage at Finance Conference

by william bole

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Jeb Bush

Even Jeb Bush, who comes from one of America’s best-known political families, says he’s trying to avoid political news during these days and months of political upheaval in Washington.

At the Carroll School’s 2017 Finance Conference, the former Florida governor and Republican presidential candidate explained during the Q&A that he’s been watching ESPN rather than news channels. “But even that’s getting political,” he said, drawing laughs. What Bush and others made clear at the June 8 conference is that politics isn’t just unavoidable. It’s increasingly a wild card in today’s financial markets.

Technological disruption is only adding to the challenges ahead for financial professionals, according to industry leaders at the annual conference.

The daylong event brought together more than 200 of those professionals and highlighted speakers including Nicholas Burns ’78, a Harvard professor who has served as a top U.S. foreign policy official, and Alfred F. Kelly Jr., CEO of Visa, Inc. Panels addressed questions such as how public affairs and world events are influencing equity investing and how “FinTech” (financial technology) startups are disrupting the industry.

In his opening talk, Bush called attention to what has traditionally been a Democratic issue while presenting Republican solutions to the problem. He focused on the question of economic stratification, or inequality, in American society.

America has always been a place where people at the bottom of the socioeconomic ladder could move up—“It’s part of who we are, it’s in our DNA,” said Bush, who delivered the Dorothy Margaret Rose Knight Economic Keynote Address. “Is that the America of today?” He expressed doubts. “If you’re born poor in America today, you’re more likely to stay poor than at any time in our history,” Bush said, pointing to causes such as the decline of two-parent families and inadequate education systems.

He also pointed to “the skills gap”—millions of jobs going unfilled because of too few qualified workers. “We’re not generating the kind of dynamism that we need,” Bush said. As solutions to these problems, he cited the need for lower taxes, fewer government regulations, less unionization in public schools, and other familiar items on his party’s policy agenda.

During the Q&A, he was asked to speculate about likely contenders for the 2020 presidential nominations. “Let’s just get through June,” Bush quipped, referring to the Trump-Russia controversy and other turmoil in Washington. That’s when he made his comment about watching sports rather than news.

“Most Complex” Security Environment

Nick Burns

The next speaker was Burns, who served in key foreign policy roles during the administration of Bush’s brother, George W. The Boston College alum said that although he learned from Jesuits not to engage in hyperbole, his considered judgment is that the United States is facing its “most complex national security environment” since World War II. He cited regional instability in many corners of the globe along with climate change, global pandemics, and drug cartels.

He made a particular plea regarding Europe. “We’ve got to appreciate how vital Europe is,” said Burns, who is the parent of two other Boston College alums and the recipient of a 2002 honorary doctorate from the University. He noted that Europe is America’s sturdiest ally as well as our largest trading partner. “We can count on those countries. They have our back.” Burns argued that instead of reaching out to Europe at a time when its countries are under pressure from extremist movements and a hostile Russian government, Washington has been alienating the continent (for example, by sending mixed signals about the U.S. commitment to NATO).

Referring to a “highly destabilized” environment in the Middle East and the lack of a U.S. response to the Syrian refugee crisis, he said, “I think we have a leadership crisis here in the U.S., and it’s a profound crisis.” Burns, who was the State Department’s top political affairs official as well as ambassador to NATO, now teaches at Harvard’s Kennedy School of Government.

One of the questions put to him after his formal remarks had to do with Russian hacking into U.S. election processes and other cyberthreats to the United States. “This is a battle that will not be fought by soldiers. It will be a battle fought by geeks,” Burns said.

Disrupting Finance

Sidebar

His allusion to tech was a pretty good segue to a panel that followed—“FinTech: What’s Real? What’s Not? Why it Matters.” FinTech refers to a wide variety of startup companies using new technologies to improve financial services for customers and clients. “You can’t pick up the Wall Street Journal without reading about something happening with FinTech,” said panel moderator Jere Doyle ’87, a prominent serial entrepreneur and executive director of the Edmund H. Shea Jr. Center for Entrepreneurship at the Carroll School.

One example is Honest Dollar, a digital retirement saving platform geared toward companies that do not offer 401k plans to their employees. “There’s a savings crisis in this country,” said panelist William Hurley about the need for this app that costs employers a flat monthly fee of $5 per employee. He is a celebrated tech entrepreneur and systems theorist who founded Honest Dollar and goes by “whurley” (lowercase).

FinTech companies compete with traditional financial institutions such as banks and payment firms, but Honest Dollar was acquired by Goldman Sachs in 2016. Larry Restieri, who heads digital strategies at Goldman, was also on the panel and said, “We’re embracing technology. We have to. We have to change.”

In an afternoon session, Visa’s Kelly—proud alum of Iona College who has sent four of his five children to Boston College—spoke of the dramatically growing numbers of non-cash transactions worldwide. “The pace of change is incredible,” he said, noting that Visa has aimed to stay ahead of the learning curve by becoming what he called “an open company willing to talk to anyone about anything,” especially engineers and others on the subject of pay technologies. Kelly was interviewed on stage by PIMCO’s Marc Seidner ’88.

Political Risks

The final panel, “Equity Investing in a Dynamic World,” drew the sharpest connections between political happenings discussed that morning and what’s ahead for financial markets. “There are constantly more political risks, and that may cause volatility and affect our investments,” said Seidner Family Faculty Fellow Ronnie Sadka, who moderated the panel and is chair of the Finance Department as well as senior associate dean for faculty at the Carroll School.

The panelists consisted of Boston College alumni and parents: Steven M. Barry ’85, P’14, ’17, chief investment officer of Fundamental Equity at Goldman Sachs; Vince Gubitosi ’94, president and chief investment officer at Geode Capital Management; and Jay Paul Leupp, P’20, managing director and portfolio manager at Lazard Asset Management. They touched on a number of political question marks including tax reform, trade policies toward China and Mexico, the continuing European fallout from Brexit, and geopolitical flash points such as nuclear-armed North Korea.

The market hasn’t yet clearly reacted to these and other potential volatilities, but “there’s certainly that risk,” said Gubitosi. Referring also to recent waves of cyberattacks, Barry pointed to risks related to companies underinvesting in their own cybersecurity.

“We try not to handicap the elections, but we do try to be proactive and nimble once we have the facts,” said Leupp, who proceeded to cite what his and other investment firms missed in connection with the U.S. presidential election last November. Like nearly everyone else, they did not expect Donald Trump to prevail, and so they missed out on significant gains in both hotel and prison-industry stocks that resulted from the election of a hotel magnate who favors privately run prisons, he related.

The Finance Conference is the signature public event offered each year by the Carroll School, bringing together practitioners, academics, and policy makers. As always, the conference highlighted “great ideas and exhilarating conversation,” which the Carroll School strives to nurture among its students, said John and Linda Powers Family Dean Andy Boynton. He co-chaired the event with Seidner, Daniel E. Holland III ’79, P’07, ’08, Professor Jonathan Reuter, Lindsay LoBue ’96, and James E. Walker III ’84, P’18.

William Bole is senior writer and editor at the Carroll School.

Photography by Gary Gilbert and Christopher Soldt.