It is impossible to determine with some degree of accuracy whether such a bubble, in the sense of a speculation-driven price increase, has indeed formed. Central bankers are not more ignorant than investors and traders, nor are they more intelligent or better informed when it comes to the valuation of companies. One might argue that a crash is not so much the result of exuberant cash flow expectations for individual companies but rather the consequence of a sudden increase in discount rates, causing a dramatic downward adjustment of all present values. The relevant discount factors are the combined result of time preference, risk preference, and the prevailing perception of uncertainty. History has taught us convincingly that time preference is a relatively stable factor. The problem, therefore, lies more in a sudden shift of risk preference and the perception of uncertainty. If these two determinants could be stabilised, much would be achieved already. This task, however, also presupposes some “superior knowledge” and “deeper insight” on the part of central banks relative to the market. Such assumptions are unrealistic. Moreover, central banks, with the instruments they have at their disposal, do not have the possibility to deflate a presumed bubble all on their own. Interest hikes would certainly be a possibility. In so doing, however, one would have to accept consequences in the real sector which could be completely counterproductive. Finally, if central banks were obligated to avoid stock market excesses, this would have extremely disastrous moral hazard implications.

The recent launch of the FAA Learning Standards and the Finance Qualification Structure will facilitate the harmonisation and wider recognition of accredited professional learning programmes which will also be important for this industry to promote consistent standards in the professional development and mobility of its workforce. We have started to engage FAA, the industry and education providers on this initiative and are working towards the accreditation of mandatory core financial advisory training and examination modules in 2015, and continuing professional development programs progressively thereafter. To improve the alignment between the interests of consumers and financial advisers, we will be requiring all life insurers and family takaful operators to implement a balanced scorecard  2  BIS central bankers’ speeches  framework for the remuneration of agents and advisers, beginning with investment-linked products in the initial phase. We believe it is also important that such a framework is cascaded through to how financial advisory firms are rewarding their representatives. Incentives for individual representatives should be structured to promote impartial product advice, and investments in building enduring relationships with clients by providing the highest standards of professional service. The AFA will be expected to play an important role in driving this initiative through its guidance to firms on the operationalisation of the framework in the context of financial advisers. In the medium term, the Bank will examine the issue of the balance between fee-based and commission-based compensation for financial advisers more closely.