Being successful in business today is all about ethics and trust, particularly as more people look to choose products and services that match their own values and beliefs.
Across the banking and finance sector globally, there have been increasing calls – and a subsequent focus on – the accountability of individuals for the impacts of their decisions and behaviours.
This change is being led by regulators, customers and the community more broadly. They have called for individuals to be held accountable for the impact and losses experienced by clients as a result of poor financial advice, excessive risk-taking or products that have operated unethically.
Regulators are taking steps to hold individuals accountable for their actions, with prosecutions in courts that can lead to fines, criminal or civil liability and professional disbarment.
The managing director of the International Monetary Fund, Christine Lagarde, publicly approves of this strengthening of personal accountability, believing it will provide the right set of incentives for ethical behaviour. At the Federal Reserve Bank of New York, Lagarde called for a culture of greater virtue and integrity at the individual level in financial services. She specifically stated that cultural change within the sector should involve appealing to the ‘moral compass’ of individuals.
As trust declines, professional associations must step-up
Professional associations, such as the FPA, have an important self-regulatory role in setting and promoting ethical standards and holding their members to them. Such associations are increasingly pointed to by the banking and finance sector as an assurance they can be trusted to effectively engage in self-regulation.
Trust is a somewhat fragile commodity because it can be won and lost easily. Sometimes it’s lost unfairly, but at other times it’s misplaced or abused. Perhaps this has always been the case, but in many ways, we’re now more informed, more questioning and even critical as both practitioners and customers. The result is that we are better equipped than ever to question who and what we should trust. On the whole this is a good development because we’re aware that trust matters and this awareness will likely lead to better outcomes for society.
However, the continued decline of trust across business has resulted in deep reflection by the practitioners within it; they have had to consider their role, and question who they are serving and whether they are meeting expectations. As a result, we’re moving from a narrow view of the primary stakeholder (being profit or the shareholder) to a broader concept of impact and value – this shift has been much needed.
This shift matters to banking and finance as it’s distinct from other businesses because we are forced, as working adults, to have a relationship with a financial institution in order to receive pay and to accumulate superannuation for retirement. Therefore, we need and should be able to trust the sector and the people that advise us within it.
The limits of regulation
Growing inequity between what might be considered the ‘haves’ and ‘have nots’ can be seen at the centre of much political and societal unrest, leading people to question the systems and authorities they have previously trusted. The integrity of businesses and practitioners has come under new scrutiny. Are organisations delivering what they say they are? Are planners keeping their promises? Are they trustworthy? These are now common questions.
We can’t leave it up to regulators to curb unethical behaviour, instead, we all have a role as individuals to create the ethical cultures we want in business and in our communities.
Regulators are often in a bind, with much to do and funding limitations. At times they trail a fast moving and constantly innovating market. Whilst regulators have an important role in setting minimum standards, which undoubtedly indicate acceptable and unacceptable behaviour, ethical cultures and behaviours are about much more and it’s the responsibility of every individual to play their part in encouraging the right behaviours and practices, and calling out the wrong.
For many, they may feel somewhat powerless within the system or at a loss as to how to change it. They might hope for a fairer, more just society, for better and more ethical practices, but where to start? Perhaps the best place is with that which we can control – our own decisions and practices.
To be trustworthy may just be the greatest contribution an individual can make to creating a more ethical sector and trusted business environment.
In the business context, being trustworthy will involve reflecting on the following:
Your own principles and values: What do you stand for? Are you consistent in your positioning (or can you explain a change of mind)?
Skills and expertise: Are you qualified to deliver what you are promising? Can people rely on you to deliver, according to what’s agreed?
Care: Are you thinking about others as well as yourself? Have you thought of all the people affected by your decisions? Do you feel good about what you do?
What lies ahead?
Increasingly, we’re seeing people, particularly the young and women, choose products and services – ranging from their clothes to their financial planners – based on ethics and trust. They’re looking for a match with their own values and beliefs.
So, as financial planners, it would be wise to try to understand them and to ask questions. But first, one should start with oneself, because now more than ever, staying in business is a matter of trust.