Though we’ve previously discussed brokers, it’s worth noting that all brokers aren’t created equally. For example, while many people would be willing to trust a broker who displays his accreditation, has an office, and has well-trained staff and associates, not many people are willing to trust a broker who has a folding table on a street corner and claims to be qualified. Beyond the tangible aspects like the office and the staff, a large part of what serves to differentiate from what we consider trustworthy and untrustworthy is the affiliation or association with today’s word, an institution.
Thinking of today’s word, especially in a financial sense, it’s common to envision large corporations, industry-specific associations, or even regulatory bodies; however, our word would first go through a number of differing usages, all of which embody the meaning that we now attribute to it.
Initially coming from the Old French institucion, denoting a ‘foundation or thing established’, which was derived from the Latin institutionem (nominative institutio), meaning ‘a disposition, arrangement, or education’, our word was first used circa 1380 in the works of English theologian John Wycliffe, who wrote that: “For institution & induction he shall though much of this god..to bishop’s officers, archdeacons & officials.” In ecclesiastical terms, this simply meant that, by founding or taking the position as a leader of the specific congregation within the church, living expenses would be paid for by the church.
Retaining the same meaning as ‘a foundation or establishment’, the term soon stretched beyond ecclesiastical life and entered social and political usage. In his work, The Governance of England (c1460), Sir John Fortescue, differentiating between the concepts of an absolute and limited monarchy, writes that: “That other [kingdom] began by the desire and institution of the people of the same prince.”
Aside from simply meaning ‘a founding/beginning of something or association with a certain position’, by the late 15th century, the term began to morph into having the additional meaning of ‘the order, arrangement, or regulation of a specific thing’, as mentioned in the first of the morality plays (Mankind) in the Macro Manuscript: “A best doth after his natural institution.” (c1475).
Furthering this idea of institution being synonymous with regulation, within the next 50 years, this ‘regulation and order’ became individualised, being understood as ‘training, instruction, or education for people in certain positions’, as mentioned by Thomas Elyot in his 1531 work, The Book named The Governour, discussing: “The little book of the most excellent doctor Erasmus Roterodame..entitled the Institution of a Christian prince.”
Finally, we see the concept of institution being, well, institutionalised- meaning becoming an engrained custom, practice, or organisation in people’s social, political, or economic life. In his translation of Thomas More’s satirical socio-political work, Utopia, Ralph Robinson in 1551 writes a passage noting how people are: “Agreeing all together in one tongue, in like manners, institutions and laws.”
Putting all of this together, you have the establishment of an association of people who commit to maintain standards as well as maintain a certain degree of education/knowledge within a well-ordered and maintained organisation that performs one of the essential functions in a society.
Considering that total financial assets in US financial institutions has gone from under USD 40 trillion in 2002 to over USD 80 trillion in 2016, people are more than willing to pass the street corner broker on their way to the institutional broker.