In a wide ranging and informative presentation to a Pritchitt Partners function in Melbourne, Peter Kell, deputy chairman of ASIC, again raised the issue of trust.
The full speech notes can be seen here and Peter refers to the many poor practices in financial services organisations that have been allowed to override fairness and good customer outcomes. As Peter said, this can only undermine trust.
He made the point that financial services industry has a significant trust deficit in the eyes of the community.
It appears that financial services industry has forgotten, or is not aware of, the “Trust Bank” concept that was developed by McDonald’s several decades ago. This has been written about many times since and is based on the premise that every organisation needs to build trust, in the same way as a bank balance is built through regular deposits.
The McDonald’s Trust Bank balance is built by involvement in, and support of, community activities.
It is only after building a healthy balance in a Trust Bank through such deposits can withdrawals be made.
The spotlight at the Royal Commission has once again been put on some of the poor practices in customer service and support, it is fair to say the Trust Banks of many financial services organisations are seriously overdrawn.
There needs to be substantial effort to increase balances before community support, and trust, can be regained.
As Peter pointed out in his presentation the financial services industry ultimately exists to serve the community – it exists to manage other people’s money.
“At ASIC we have seen that an approach from financial services firms based on minimal or technical compliance with the law has, at times, been allowed to override fairness and good customer outcomes. This can only undermine trust,” he said.
“The message for the industry is that you need to ensure that your conduct, and your products, explicitly take into account issues around community expectations and fairness.
“The community expects that the services you provide are beneficial, have value and are focussed on good outcomes. And they expect that this will be more than just marketing hype.”
Can’t get much clearer than that.
Peter also outlined a number of initiatives that, as he put it, added to ASIC’s toolbox. These include increased penalties and powers, and greater ability to analyse data to recognise trends and problems quicker to help regulators increase consumer protection. So it should be a case of “Change or be Shamed”.