Unpicking the financial system: The financial structuring specialist

Alice Chapple explores the motivations and behaviours of structuring specialists within the financial system as part of a blog series on long-term thinking. Find out more about this at our event on 13th March on "Practical Innovations for the long-term", or read more about how you can get involved here.

• Introduction
• The customer
• The fund manager

I work for a large investment bank. My job is to develop new financial products that will make money for my company. They make money for our shareholders, too. And the chances are that many of you people reading this article will have a share in my bank as part of your pension. So before you get onto your high horse, I just want to make it clear that when I do well, you do well.

I work long hours Don't get me wrong - I'm not grumbling. I'm just saying that I deserve the money I'm paid. I have worked hard to get here – my bank only takes the very top students from the top universities. I have skills that most people don't have. And financial institutions desperately need skilled people like me. So the simple law of supply and demand drives my pay packet. I can't see any reason why I shouldn't take advantage of that.

My main goal is to make enough money to have a great house, great holidays, send my kids to the best schools, retire early so that I can spend more time with my family and enjoy life. I'm not one of these people who buys flash cars or watches or clothes. Most of my friends work in the City, though – and there is a bit of pressure to keep up with them. To be honest, most people are keen to make their money as fast as they can, as no-one really knows what the future will bring. If I did have any to spare, I would love to be able to set up a charitable foundation of some kind.

Believe me, I am not oblivious to the concerns people have about the amount of money we're paid in the City. But we do generate a lot of tax revenue. (Yes, we do take advantage of offshore tax havens, but there's nothing illegal about managing tax as efficiently as possible.) And as a financial centre, the City creates a massive number of jobs. Financial services is an area where the UK has always had an advantage and we would be crazy to put that at risk by putting banks off investing in London.

The financial crisis was a massive shock for everyone. I know that some of the more complex products that we developed in the run-up to the crisis failed to spread risk in the way we anticipated. That was unfortunate, and I take some responsibility. But, as with all innovations, you expect some to fail. I have friends who lost their jobs, as well as their entire savings because they were tied up in share options – thousands of pounds just disappeared off the value of their personal portfolios. Luckily, they were able to find good jobs in the City quite quickly afterwards.

Key points

• The City has a culture that rewards financial innovation for its own sake. Some financial innovations may generate money for shareholders. But what are the other impacts? What else does it enable? What is the benefit to the economy as a whole?

• Bright minds could be put to better use. The size of pay packets in the City means that many talented individuals are deployed in activities that make little meaningful contribution to economic wealth.

• The financial services sector operates in a self-referential bubble. The downside experienced by financial services employees as a result of the financial crisis cannot be equated with the job losses that many, more vulnerable people have suffered as a result of their failures.

• Because I'm worth it. Those employed in the City justify their pay packets by arguing that their skills are vital in creating liquidity and improving market efficiency, and that everybody benefits. Whether they really believe this, or it is simply a diversionary tactic, this assumption needs to be tested much more effectively.

Key actions

• We need a more sophisticated analysis of the costs and benefits of many of the activities undertaken by the financial services sector. This has to be done before hubris creates the next crisis.

• Remuneration in the finance sector needs to be more closely focused on long-term value than on short-term financial performance.

 This series was originally published by the Guardian Sustainable Business blog