How our industry betrayed the public and three ways to fix it

Vanessa Stoykov,  creator,  No More Practice

The deeper I go into my analysis of how trust is repaired for an industry, the more concerned I become at the deep-seated nature of the problem that needs to be fixed.

While we are all gasping at the findings of the Royal Commission, and our industry enters a shocked and silent limbo, I know more business leaders are thinking of the job ahead post Commission.

Unfortunately, there have been systemic cultural issues in many parts of financial services organisations that have fostered a culture of self-interest over ethical considerations.

That’s a fact and there is simply no denying it. Many of my colleagues that run major organisations have expressed their surprise and dismay over how deeply-rooted the issues are.

So for those of us who have acted with integrity (which I firmly believe outweigh those who have not) how do we go about building faith in the public again after this betrayal?

Because that’s what it is. Yes, it’s disappointing, but it’s so much more than that. Trust has been broken for some vital parts of the financial landscape - in particular financial advice and corporate structures that have led to selling product before the needs of the people.

Not only is it disappointing, at its very core it is a betrayal to the public of a colossal nature - when someone works hard for retirement savings and poor advice is given, or the wrong solution recommended because it works in favour of the company giving it, then people are betrayed.

Professor of Philosophy at Northwestern University, Sanford Goldberg, says that trust is a reliance people put on others and if broken can lead to serious issues of betrayal. Meaning the very nature of trust is emotional, not simply rational or factual. And repairing emotional betrayal can be difficult at an individual level - and near impossible for an entire community.

For institutions, in many cases the people who created a culture of self-interest are long retired, leaving the leaders of now holding a bag full of holes to patch. This will take time and a systematic cleaning-out of the old guard and an entire restructure to reflect the principles and ethics needed to repair betrayal at a corporate level. That’s a 20-year journey ahead of us.

For financial advisers at the coal face, you are going to have to start to repair this betrayal - that quite possibly had nothing to do with you - immediately. As soon as the findings come out in February 2019, those left who want to continue in business need to be on the front foot.


Three things you can do instantly are:

  • Ask your biggest fans who are clients to tell their story. Make it into a video or write it, but record it and promote it - at least on social media. When betrayed, the public will trust the word of other people over yours.
  • Update your website and acknowledge the Royal Commission in at least your news section. Not talking about the elephant in the room won’t help you win more clients or rebuild their view of advisers.
  • Network with each other. Sticking together in tough times will give you the energy and focus to know you are not going it alone. Attend industry conferences and ask others how they are finding it, and what they are doing about it. It really does help.

I’ll be writing more on this over the coming months, and No More Practice Education will be talking to many of you and sharing your stories on what’s working for you. We are with you.

Until next time,

 

The opinions expressed in this content are those of the author shown, and do not necessarily represent those of No More Practice Education Pty Ltd or its related entities. All content is intended for a professional financial adviser audience only and does not constitute financial advice. To view our full terms and conditions, click here.

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David Penglase

24/07/18

Vanessa Hi, I was forwarded your article by a client and wanted to commend your point of view here. As a long term client and advocate of the same trusted adviser now for over two decades, Your first suggested action of the three things advisers can do instantly is of course aligned with evidence-based research around the importance of social proof as a powerful and positive influencing strategy. With all the noise of the Royal Commission, many Advisers can fall into the trap of thinking negatively about their profession to the point that they can misplace their focus from all the positive advice and results they've helped their clients achieve. Keep up the great work Vanessa. Warm regards, David

Gordon Black

27/07/18

Yes Vanessa we must all agree that the Australian people have been betrayed but are advisers to blame? Are financial institutions culpable? The answer to both is yes but only in part. The real responsibility lies with politicians. Mr Keating changed our retirement system to self funding but neither his government nor any subsequent one has faced up to the fact that people need advice; very very few people can adequately plan for their retirement nor manage their way through it. The GFC exposed the fragility of many people's financial plans but nothing was done then and what is happening to the industry now will only make things worse. It's about time that our politicians recognised that a strong and healthy financial advising industry is vital to the wellbeing of our society.

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