A pair of political shocks stemming from the outcome of the U.S. presidential election and a landmark U.K. referendum dominated headlines in the financial services industry in 2016. The U.S. Department of Labor's fiduciary standard rule, consolidation in the exchange operator space and expectations for gradual interest rate hikes by the Federal Reserve also guided decision-making throughout the year.
As 2016 draws to a close, S&P Global Market Intelligence highlights a host of news-makers who impacted the financial services industry, and who will likely continue to exert their influence in 2017.
Tom Barrack Jr., founder and executive chairman, Colony Capital Inc.
Barrack, chair of Donald Trump's inaugural committee, has been one of the President-elect's main conduits to the public during the transition process. In addition to helping plan the inaugural festivities, Barrack has been vocal in exploring options for a federal infrastructure bank and a potential one-off tax of funds repatriated from U.S. companies overseas.
Colony Capital, meanwhile, overcame heavy resistance from a group of activist shareholders to gain shareholder approval for a tri-party merger with NorthStar Asset Management and NorthStar Realty Finance Corp.
Steven Mnuchin, Treasury Secretary nominee
Nominated as Treasury Secretary on Nov. 30, Mnuchin intends to lead efforts to adopt sweeping tax reform and has voiced support for plans to privatize Fannie Mae and Freddie Mac. If confirmed, Mnuchin will become the latest Goldman Sachs Group Inc. alum to head the Treasury Department, following in the footsteps of Robert Rubin and Hank Paulson. As of Dec. 22, shares in Goldman Sachs had jumped more than 30% following Trump's victory, representing nearly a quarter of the Dow's post-election surge, according to data from FactSet.
Brad Oates, who served alongside Mnuchin on CIT Group Inc.'s board for 17 months through December 2016, lauded the nominee for his business acumen and attention to detail.
"He understands how to work political channels in business," Oates said in an interview. "He's ... obsessive about the details. In that regard, he'll be a very effective Treasury secretary."
Jeb Hensarling, Chairman, House Financial Services Committee
In September, the House Financial Services Committee approved the Financial CHOICE Act, legislation that aims to roll back much of the Dodd-Frank Act and retroactively scrap decisions to designate firms as systemically important. Hensarling, committee chair and sponsor of the bill, could lead reforms in 2017 to repeal key provisions of President Obama's sweeping financial regulation law.
Under Hensarling, the Financial Services Committee also launched an investigation in September into the widespread fake account scandal at Wells Fargo & Co. The accounts resulted in the imposition of more than $2 million in fees on unsuspecting customers, Hensarling wrote in a Sept. 16 letter to the Consumer Financial Protection Bureau.
Larry Fink, chairman and CEO, BlackRock Inc.
In April, the Department of Labor finalized a long-awaited fiduciary standard rule. With demand for passive investments surging, BlackRock slashed fees on 15 ETFs in early October. In a span of two months, the funds had nearly $15 billion in aggregate inflows, according to Bloomberg, including more than $6 billion into its iShares Core S&P 500 ETF.
Fink could be viewed as a trendsetter in recognizing the importance of lowering fees while bracing for the possibility of a prolonged pricing war. Fink spoke at length in October about how Blackrock plans to use Aladdin, its risk management system for wealth managers, as a way of helping clients adapt to the rule changes.
Stephen Schwarzman, co-founder, chairman and CEO, Blackstone Group LP
Trump named Schwarzman to lead his strategic and policy forum, a group designed to provide direct input to the White House from the business community. Days after receiving the nod, Schwarzman told an audience at Goldman Sachs' U.S. Financial Services conference that he expects the "architecture of the financial world ... to change very substantially" under Trump's administration amid significant regulatory changes and a high probability of a territorial tax system. Schwarzman also expects Trump's pro-business policies to push U.S. GDP higher by creating a friendlier marketplace for foreign capital.
Exchange operators driving industry consolidation in 2016: Edward Tilly, Chairman and CEO, CBOE Holdings Inc., Robert Greifeld and Adena Friedman, outgoing/incoming CEO, Nasdaq Inc.
In a deviation from the company's long-term M&A strategy, CBOE announced the acquisition of Bats Global Markets Inc. on Sept. 26 in a $3.2 billion cash-and-stock deal. The announcement came shortly after Nasdaq completed its acquisition of International Securities Exchange from Deutsche Börse AG for more than $1.1 billion. Bats Global's position as the largest exchange operator in Europe could allow CBOE to broaden its geographic reach with Bats' pan-European equities and global foreign exchange positions, Tilly said.
"The planned integration of CBOE and Bats businesses would combine product lines that span asset classes, including leading options, futures and volatility products, cash equities and global ETFs," Tilly said in an emailed statement.
And at Nasdaq, Friedman is set to replace Greifeld as CEO on Jan. 1, 2017, making her the first woman to head a major U.S. exchange operator.
"I believe Nasdaq is in its strongest competitive position ever," Greifeld said in a November statement announcing Friedman's promotion.