I have to start with the bad news on this topic.
Are any of us surprised by the current revelations stemming from the Financial Services Royal Commission?
Are any of us surprised as to the extent of the unethical and illegal behaviours documented and admissions made by senior management into the systemic corruption of their businesses, especially in the financial planning sector?
The admissions being made by senior management of the likes of AMP and CBA are utterly astounding. Then comes the audacity of blaming growing shareholder returns as their excuse to exploit and deceive customers. Saying they were unaware of the corruption is ridiculous.
This happened on their watch and they let bad things happen — for a long, long time.
Which tells us that this was no accident. This was intentional.
As the old German saying goes, “You sweep the staircase from the top”. So whatever comes down that business cultural staircase is what will be evident at the customer coal face.
Some historical perspective
This culture of greed and exploitation in the banking finance sector started to rear its ugly head back in the late 1990s and early 2000s, which I got to see up close and personal.
At Barrett, we have done a lot of work across the banking finance sector mainly in the business banking area which, I have to say, is aboveboard in the main and a great sector to work in. I believe business banking still is a better managed part of the banking system today. The leaders we have worked with in this sector were about doing good business with clients, leading great teams who were focused on winning trust and helping their clients run better businesses. Business banking relationships are by definition more complex, more personal and require a degree of intelligence and collaboration to make them work in favour of both the client and business banker.
In business banking there isn’t the trailer commission mentality we see in the financial planning and consumer sectors. Business bankers are paid a fair salary and rewarded on a well-managed portfolio, risk management, and total sales and margins, not individual products.
So it probably comes as no surprise that we never did win work in the financial planning and mortgage broking sectors.
We did naively try in the first instance. However, when we went up close and personal with senior management and did our investigations into their business models we soon discovered some very shady dealings and morally corrupt intentions and behaviours. They didn’t say this out loud. Of course, why would they relay their true intentions? They hid their real intentions behind ‘doing right by the customer’ ad campaigns and platitudes. AGHHHH. It makes me sick just thinking about it.
Our model of selling better and a fair exchange of value ethos was completely at odds with their intentions, which is why we were always spat out of the selection process. Oil and water.
As little as two years ago, we turned down a large sales training assignment with a well-known and large life insurance business that sang all the platitudes of being ‘customer centric’ while rewarding self-serving sales approaches that did not offer best advice for customers. Rather, there were the high commissions for certain products over others for sales people on very low salaries who had to make choices between paying their own rent and doing the right thing by the customer.
Many of you will know that I have been calling out and writing about this sector for years. Calling out the issues with commissions that favour the financial planners, personal bankers and brokers at the expense of the customers. Calling out the duplicitous nature of their positive public face and dubious private behaviours. There is no other way of looking at it other than it is a direct reflection on their leadership and stewardship of their businesses and teams. The buck stops with them.
On one hand it’s heartening to see this corruption now being exposed to the light. On the other it’s so disappointing and disturbing to see the blatant disregard for the rules and regulations of this industry and no one on the regulating boards calling this out sooner.
It will be interesting to see what the recommendations will be from this royal commission. Taking financial planning out of the banking sector to another area and not making changes is just kicking the problem down the curb and not changing anything. For any redemption there must be a wholesale change across this industry sector on every level.
Interestingly, when I posted on social media earlier this week about my dismay at the findings of the banking royal commission and the need for wholesale transformation, I received this response:
“This is not meant to be apologetic, but diagnostic. But in my experience the predominant cultural value in many businesses remains ‘to protect the business and jobs’ and that when there is a choice to be made, the obligation to shareholders still outweighs the obligations to customers. After all, ‘shareholders are stakeholders’ while ‘customers are targets’. So while ever meeting the customers’ needs aligns with shareholders interests all is fine, but when it doesn’t, ethical boundaries are challenged and overstepped in protection of the overriding cultural value, that the obligation to shareholders is greater. We see this also extended to non-profit organisations such as religious organisations, political parties, and governments. Not excusable. But still cultural.”
My response was this:
“I would argue that if you cannot run a business that does not allow for the ethical treatment of customers then you do not have a viable business, instead you have an exploitative operation that is no better than drug cartels and the mob who are looking for victims not viable prospects and customers. In James Comey’s interviews about his book, A Higher Order- truth, lies and leadership, he talks about leadership and moral guidance to make the right decisions – it is well worth a listen.
“Running an ethical business with due consideration for shareholders, employees and customers is what is missing here with the likes of AMP, CBA and so on. Without happy, viable customers, shareholders have no realised value now or in the long term. [I believe] AMP leadership and the like did not manage and lead their businesses well. Instead, they defaulted to the lowest common denominator — greed and exploitation.
“Customers are not targets in the 21st century. They are buyers who have a lot of choice about who they engage with and those businesses that can offer safer, more trustworthy business models that endorse a fair exchange of value, trust, sustainability and partnership will be far more successful in the 21st century than that old model of exploitation and winner takes all.”
Greed, hubris, criminal conduct and more has overtaken a once respected industry.
Our bank managers used to be one of the most trusted members of our society. Oh how they have fallen.
So what can you do?
Where can you start?
How can you and your business sell better?
At least 10 things the banking and finance sector needs to do earn back the trust and commitment of customers and shareholders
- Reset the priorities of the organisation to establish clear goals, values and expectations for business and sales growth that endorse a fair exchange of value and is ethical and inclusive of customers, employees and shareholders;
- Reset leadership teams to transition from short-term, bonus-driven, ‘winner takes all’ cultures to adopting a longer term, ethical and sustainable approach to running better businesses that is human-centred and not solely profit driven;
- Reset the culture by adopting the selling better practical sales philosophy and articulate a code of conduct that is ‘how we sell and do business around here’;
- Reset the sales strategy, value proposition and sales operating system that serves the markets they want to work in and be transparent in setting up a fair exchange of value and win:win outcome for both buyers and sellers. Shareholders will benefit from this too;
- Reset the selling-buying-servicing processes to show everyone in the organisation how they help and serve customers in a timely and effective manner around the remit wanted to take to market. Create consistent standards and processes that can be applied, learned and assessed;
- Reset product explanations and pricing by having a lexicon that is clearly displayed and clearly explains what each of the products and services are and what they do for customers. This should be in simple plain language with case studies that spell out the risk factors and consequences of such products and services. No hidden fees or ambiguities. No tricky play on words;
- Reset whole businesses around customer centricity, starting with customer-facing teams to show them ‘how we sell and service around here’, what is expected, what they are accountable for, and what is not accepted, then roll out across the whole organisation — everybody lives by selling something. Train, educate, coach and support their adoption of the ‘best way to sell and service around here’;
- Reset all commission, bonus and reward structures to remove any competing motivations that set people up for the wrong behaviour. Bring remuneration levels back to a level playing field that rewards ethical and sustainable behaviour that delivers sustainable returns. This is one of the biggest issues in the banking finance sector that needs to be addressed but not in isolation;
- Reset the way organisations reinforce, communicate and support a more human centred, ethical business approach. Lead from the front, set the purpose and direction about what is expected on a daily basis in how we sell and do business around here; and
- Finally, reset how quickly you call out unethical, corrupt and criminal behaviour in your own business. Get on the front foot addressing these issues immediately with gravitas and certainty, accompanied by the appropriate consequences. Don’t wait to be found out. That is the coward’s way of managing and behaviour and we are now seeing a lot of cowards, vagabonds and thieves being exposed to the light
Just image the banking and finance sector running like this.
The good news is that there are businesses in the banking and finance sectors that are doing the right thing. They have the customers’ and their own businesses best interests at heart. They work in collaboration, based on trust and substance. Those organisations who can step in to show a better way to do business will make winners out of clients, employees and shareholders.
Remember everybody lives by selling something.