It will be fascinating to hear what Peter Kell, deputy chair of ASIC, has to say at the Pritchitt Partners Financial New Year lunch next week on how financial services firms can act to meet community expectations and engage with regulatory reforms.
Regulators seem to be copping some of the blame for financial institutions malpractices aired at the Royal Commission.
With hindsight, perhaps ASIC could have acted more quickly and possibly differently in challenging some of the activities by major institutions that have been exposed by the Royal Commission’s spotlight.
But it wasn’t ASIC that misled clients and acted inappropriately. And it doesn’t make it easy when boards edit reports that the rest of the world thought were independent, even if afterwards it’s claimed they weren’t supposed to be.
ASIC has even been criticised for efforts at doing something about the culture of financial services in recent years, which has been characterised by some as a distraction – yet the wrong culture has been acknowledged by financial institutions themselves as a major reason for poor client practices.
As others have pointed out, it might not be possible to regulate culture, but at least ASIC recognised it was a problem – and while they were looking at it one might have expected boards to think it might be a good idea pay attention to the way things were done. Organisations now seem to understand the critical importance of changing organisational culture, and perhaps it should have been a priority before now.
Several senior executives of financial services organisations have said that they have now got the message about the way they treat clients and the need for trust, although it remains to be seen whether they will be able to change their operating culture.
Commonwealth Bank has grasped the nettle with both hands, announcing that their wealth management business will be spun off into a separate listed entity. Other major banks are also reported to be looking at approaches to divest their wealth management businesses.
Such moves don’t quite overcome the potential conflict of interest if wealth management organisations still have both asset managers and advisers under the overall control of one board and senior executive team. The temptation to have advisers promote company products to their clients must always exist in such a structure.
However, it does give the opportunity for the new independent entities, removed from old constraints, to develop cultures and practices that put clients’ interests first and, by doing so, build trust and repair reputation.
While a change in structure will help, culture is not a structural issue.
Culture is to do with the way things are done and why they are done. It is about relationships and priorities, humanity and emotions and, most of all, ethical standards and honesty in the way standards are communicated.
In an ideal world, public relations professionals should have the status within an organisation that gives them awareness of business practise and allow them to act as the conscience of an organisation.
They should be able to influence the attitudes of a company based on community expectations and ethical standards, which in turn will help maintain an appropriate operating culture.
But as I’m in communications, I guess I would say that!