Last year was, to put it politely, a learning experience for many of us in the financial services industry. And it’s critical that we carry those lessons forward into 2009.

The events of 2008 stretched the bounds of credulity even for seasoned market watchers. It was the year in which the unimaginable quickly became routine, and the entire global financial system teetered on the brink of collapse.

At this time a year ago, no one would have thought that several of the world’s biggest brokerage firms would soon disappear, that the U.S. central bank would have to buy out one of the U.S.’s largest insurers and that governments around the world would have to prop up big banks. The recent revelation that a venerable Wall Street firm is little more than a US$50-billion Ponzi scheme is an appropriate denouement to what has been the financial services industry’s annus horribilis.

Given the scale and scope of the market calamity, it’s tempting to shrug if off and attribute it to global forces beyond any individual’s control. But scratch the surface of the crisis and there are very ordinary, personal failings at its core.

The credit bubble had its roots in routine greed — a basic desire by households to spend and consume more than they could afford, coupled with a financial services industry that was only too willing to supply excessive credit if it maximized short-term volume — as long as the industry was able to pawn off the risk to someone else.

Although households’ demand for credit is now self-correcting and the authorities are performing triage on the most crippling aspects of the credit crunch, the same failings that led to the crisis in the first place are still evident. To avoid the next crisis, the industry and its supervisors must focus on correcting the fundamental shortcomings that led to this past horrendous year.

For example, advisors, firms and regulators must make certain that they are rigourous about ensuring suitability — that they sell only products that they understand and that they follow the know-your-client rule to the letter. They must pay scrupulous attention to risk. And the industry must reconsider incentive schemes that reward transactions and devalue advice.

If it fails to learn these lessons, the financial services industry won’t earn back the trust that’s so essential to its survival.