There has been a significant and consistent move forwards in professionalism in retail financial services.
There has been a significant and consistent move forwards in professionalism in retail financial services.
Part of it has been driven by legislative amendments and part of it has occurred because of the changing expectations in the market, and the desire of financial services companies to position themselves as providers of integrity as well as quality services.
That said, the financial services industry does face significant hurdles on the road to professionalism. One is enhanced competition and the realisation that because of modern telecommunications and the Internet, a single failure or slip up in ethical behaviour will rapidly become known and will bring an organisa-tion’s brand into dispute within an instant.
While bodies like the Financial Planning Association have shown a way to enhance the standards and internal plans run by financial services companies, there are two really big challenges ahead.
The first is the ability of the industry to reflect honestly about some of the entrenched practices they employ. The whole question about how one remunerates tied agents and intermediaries raises issues.
The second and largest challenge for the industry (and all industries) is that the true professional is, by definition, a group of people who self-consciously agree to set aside self-interest to act in the interests of public service and to place the interest of their clients ahead of their own.
That’s difficult for people in financial services because they interact with fi-nancial markets and in those markets, we have a general acceptance that the par-ticipants will act in their own interest and will be guided by what Adam Smith called ‘the invisible hand’. The idea was that if you wanted to be in a profes-sion, you moved out of financial markets.
There is some degree of cynicism about the industry amongst consumers, which means that those who supply services need to build a relationship of trust and regard, where the highest good is the maintenance of integrity.
The industry has made significant strides forward but there are still pockets of individuals who do the wrong thing and there are some dinosaurs. Some still see an arbitrage by making a killing cutting corners. Although the environment today makes that more hostile for them, it’s still early days. There’s greater sophis-tication today and organisations are taking hard decisions, but the move into a place where it flourishes is still some time off.
The financial services industry is only just starting to think about issues of corporate social responsibility – engaging in the community in a way that builds it. The big thing that will change all this is when members of superannuation funds start demanding more than returns. They may not want ethical investments but they will want to support companies that have a conscience. There will still be an issue of performance but they will want more. And that will impact on the way corporations behave.
To be professional takes a high level of skill and a commitment to continuing education. But it takes much, much more than that. It takes an ability to put the interests of others before your own. It takes sound judgement and the moral codes to do what is right, even when there are temptations not to do what is right. The financial services industry is heading in the right direction but if you want to be a professional, in the ideal sense of the word, you need to take a long hard look at what you do and engage in close reflection.
Dr Simon Longstaff heads the St James Ethics Centre in Sydney. St James Ethics Centre advises companies, both large and small, across the world on the applica-tion of ethics in day-to-day practice. Dr Longstaff also consults to a range of organisations in banking and insurance and serves as the independent chairman of MLC’s standards committee.
