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Trust in Financial Services: What to Do When Doing the Right Thing Isn’t Simple

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At the end of the two-day Financial Services Council annual Summit in Melbourne a few things are painfully clear.

First, there’s no hiding from the brutal truth of poor conduct and the damage it’s done (or about to do) to community trust in superannuation, life insurance, banking and financial planning.

Secondly, no one in the industry is any longer overtly trying to defend the indefensible.

And finally, that even though many in the industry are fixing the issues, there’s no blueprint for collective action to restore trust.

Why not? In part because it’s not over yet. With rounds of Financial Services Royal Commission, and more negative media to come, the industry is preoccupied – reacting, not planning.

While we’re reacting, we’re not short circuiting the issue. But ending this part of the cycle of bloodletting, reform and criticism will take industry unity.

It’s not a job that can be done by a person, an organisation or single sector.

Only collective finance sector action will rebuild community trust.

While individual banks, insurers, financial planning firms and insurers can fix the underlying issues, trust will not follow unless the industry unites to restore it’s reputation.

A 3-point blueprint for reputation rebuild

Reputation is built or destroyed by actions. Specifically, the good or ill done by those actions. The groundbreaking work of the Reputation Institute over two decades clearly shows that you are judged by what you do as a brand, industry or country.

There’s not a simple solution to the question of how the industry goes forward from here. That said there are some elements of a reputation rebuild that seem essential.

 PwC asset and wealth management leader Chris Cummins suggested a three-step process for addressing challenges facing the industry: to proactively identify issues and remediate them; lead in policy change and reform; and lastly, engage with a variety of stakeholders for better outcomes.

He’s right, and his views were echoed widely in different forms by BT, the FSC and many others.

The question I’m addressing, given what we do, is how to engage stakeholders more effectively.

1. Shared value and shared values

Underpinning action are our values – a belief in, and commitment to, shared agreements to “do the right thing” and a shared understanding about what the right thing is.

Shareholder value is no longer the single or even most important goal. Now, it’s more appropriate to have a clear goal to create shared value for consumers, investors, counter parties and the community.

If we accept shared value as a principle then we also need shared value s.

As a banking wealth management industry there is no charter of shared values. Call it a code of conduct, a set of ethical guidelines or a charter, we need one now, and ideally one that is both compulsory and across industry sectors. Why don’t we have one? Probably in part because of the nightmarish scenario in which competing industry parties would have to work together to create one.

Maybe the pain of staying the same is now great enough to outweigh the pain of this kind of change.

It may be a utopian ideal but agreement on shared values among all the industry and professional bodies of substance would put a floor under both conduct and a reputation rebuild effort.

This would mean ISA, the FSC, ABA, ASFA, FPA, SMSFA, AIST and others reaching agreement.

As one senior commentator said today in a private conversation “We’re all tarred with the same brush”. A shared set of values across industry sectors would underpin real change, and give the community tangible evidence that the industry can come together in consumers’ best interests.

2. Paradigms, people and process: critics as best friend

Jim’s Collin’s oft-cited book Good to Great makes the point that great companies and leaders confront the brutal truth.

This means turning our face, collectively and unflinchingly, to the most unpleasant aspects of our industry and the most damaging or potentially damaging consequences of our actions. It also means asking critics, not fans, employees, clients or those with a conflict of interest which leads them to give falsely positive or overly favourable feedback.

How often do companies and leaders do this at all, let alone well?

Yet it’s the perfect hedge against paradigm blindness.

Related: The Future of Business: “Am I Treating Each One of My Stakeholders Correctly?”

People

I’d argue not often, and not systematically. Working with top and mid-tier firms I see plenty of ‘pleasing response bias’ even when leaders seek unfiltered feedback.

On an individual level there’s a whole lot of telling leaders what they want to hear.

It might be habit, culture or just that the Board and CEO don’t push hard enough for the negatives or unpleasant feedback. Real candour is rarer than it might be. We risk our relationships each time we ‘enter the danger‘ so to be fair, the responsibility sits more with leaders than their teams to seek out and air the trickiest topics.

Process

On an organisational level there’s a similar gap.

Few companies have systematic stakeholder feedback systems that deliberately seek views from their critics, from the outliers or from former employees.

That now seems like a serious strategic gap. It’s a flaw in reputation risk management. It’s also a knowledge gap for risk management teams and Board members. There’s an opportunity to think more deeply about critical feedback systems if we’re to build better organisational listening ability.

Post-financial planning round of the Royal Commission I’ve heard from half a dozen former employees of one particular brand who had concerns about ongoing practices in the business. They were clear about the cultural antecedents of it, the executives involved but also the importance and difficulty of remedying the issues. They were all also loyal to the brand. They are stakeholders who are not the inner circle like current employees, clients or investors. But they are a useful ‘inner outer’ circle with valuable insight.

Asked the right way, they’d have been able to provide clear signals about where risks sat in the business.

These were the canaries in the coal mine.

But no one heeded their indications that all was not right.

Of course ex-employees are ex- for a reason. It might be a better offer or opportunity or it might just be that they’re negatively biased. Accounting for that bias in gathering and assessing feedback would still be a lesser evil than not getting early warning of risks. Other sources of data include commercial partners and regulators. While many brands are now good at social listening, that’s unlikely to reveal what this “inner outer” circle of stakeholders really think for good reasons like confidentiality and future income.

Doing this would mean asking people we’ve actively sought to ignore in the past. It would mean developing a better organisational tolerance for discord. It would mean pressing for the most negative views, not the most positive ones. And it would mean being prepared to act in response.

3. Collective communication

So where do we go from here?

There’s opportunity even in the worst crisis of trust – to repair, restore and actively face into the change that’s needed. Change in how we communicate is probably needed at the individual, organisational and industry level.

How might that work?

Each of us who earns an income or gains value from the wealth management industry carries significant personal responsibility to do good.

That can start with a personal commitment but must lead to action. A simple action is to keep in mind, and keep telling, the good stories.

One constructive organisational level action is to do what many are trying to – which is to put consumers first – at the heart of thinking, actions and financial considerations. That’s work for those who know far more about the people we all serve, and the products and systems that actually serve clients than I do. All brands have job to do to rethink how they communicate about what they do – whether to pull back on marketing for now, and spend more time listening, or to be bold about positive change as BT has been. NAB’s focus on penalty interest for farmers in default was both smart and kind. CBA’s Ian Narev was fast and frank in his apology around life insurance issues.

Related: Five Ways to Make Sure Your Message Is Heard

Where I’d ask industry leaders to try harder is at the industry level.

Rebuilding community trust isn’t going to happen fast or easily. It’s also not going to be done at all if each brand goes their own way without a joint effort across industry categories.

Trust will build faster and more effectively, if the industry and it’s peak bodies work collectively.

There are many good stories to be told, to multiple stakeholders, by many respected leaders.

It’s time we talked about how to work together to restore trust, not whether to.

And it’s time we communicated together about the issues, how they’re being fixed and how the industry is working for good.

We owe it to the people we serve.

The Royal Commission into Financial Services continues to shake up the industry. Like the proverbial stone in the pond, the ripples will affect us all, for good and bad and we are keeping a close watch on the seismic shifts – and the minor tremors.

As we make sense of the task ahead for the industry – restoring trust – we’ll share our observations as communicators. Read our review of Round 4 of the hearings here.

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