Strengthening the core of financial planning

15 November 2018

Daniel Murray

Daniel Murray is the Director of Empathic Consulting. He's had a long career solving some of the most complex and sensitive strategic challenges for Australia’s biggest financial services organisations.

The culture of an organisation is not something that no single person owns, but is influenced by everyone in that business, and is key to fixing systemic issues within financial services.

I know a little bit about the causes of bad behaviour that have surfaced at the Financial Services Royal Commission, particularly regarding the deep and troubling findings into financial advice.

During my time as a management consultant within the a prominent financial institution, I was tasked with leading many large and challenging projects and reviews. Many were strategic in nature and generally focused on developing new ways to improve the business for customers, employees and shareholders.

In the wake of the massive financial losses in 2008 within the financial advice business, I was asked to come in and help shape our response to the problems. Publicly, the institution announced that poor financial advice had resulted in clients losing more than $400 million through the GFC.

The process followed a set of pretty straight forward questions. What controls failed? What risks did we not foresee? What new controls might we need to stop this happening again?

I conducted hours upon hours of workshops, stepping through vast numbers of risks and controls, hearing of the issues and failures, and exploring the systems and processes that had led us to this point. The focus of the questions was on the mechanics: processes, systems, controls.

That seemed like a sensible line of questions, but in hindsight, they were entirely the wrong questions to focus on.

We were interrogating what happened, hoping that the cause would be uncovered in a failure of a system or process. We hoped we could find the hole in the dam wall, so that it could be fixed, and the machine could start up again, free from the past failings. We wanted to find something tangible to blame, something mechanical that could be changed, a loose bolt or a broken headlight. But what did I really find?

The problem then, as it probably is now in many businesses and industries across the world, was not one of processes or systems, it was of people, culture and intentions.

Uncovering the layers

Imagine that an advice business is a big circle. At the edge of that circle exists the point where the client and the adviser interact – the ‘interaction’ layer. This edge is where the conversations occur, the processes, paperwork and decisions turn to action. This edge is the most tangible part of the process and the place we interrogate when things go wrong. But we need to ask what drives this interaction?

Imagine the layer below this edge. This layer contains the ‘intentions’ that the adviser has for their client, their desire for them. This intent shapes the questions they ask, the information they receive, the things they focus on and the things they ignore. This layer is incredibly hard to define and almost impossible to objectively measure. This sits in the hearts and minds of the adviser, influencing all that happens in their work. But what drives this?

The layer below the ‘intention’ is the organisational or industry ‘culture’. The way we do things around here, our modus operandi, the language, terms, norms and behaviours that we promote, accept and cultivate.

This powerful layer is shaped by leaders, KPIs and the symbols of the business. It is not just the words we write on posters and plaster on the walls, but it is the shared beliefs and reinforced behaviours sitting in the minds of each team member.

Culture is something that no one person owns, but everyone influences and is influenced by. Culture is the average of all the messy, complex and constantly evolving interactions in your business. It is the powerful driving force that impacts everything!

The ‘culture’ shapes the ‘intentions’. These ‘intentions’ shape the ‘interactions’. So, what shapes the culture?

Shaping culture

Culture is formed by people. So, often we talk about a toxic culture as if it were a furry monster in the corner, or the twisted will of one specific person, usually the CEO or leader, who has created this monstrosity through their sheer gravitas. This is wrong.

Culture is the average of the millions of interactions that happen right across a business every day. These interactions are vast and varied. They could be the way we speak to each other, the jokes we tell, the clothes we wear, how we wear them, how we hold our bodies, the gestures we make, the tone we use, the food we eat, the tidiness or untidiness, the fakeness or authenticity with which we do things.

The reality for a culture is that every person in it, contributes to it, constantly. The advisers that bend, stretched or broke the rules made those decisions. Individuals took actions. Each and every little action created the culture and this culture shaped the intentions and interactions.

Digging down to the core

So, if we are to transform an industry shaken by the findings of the Royal Commission, we need to know that we aren’t dealing with the outer layer alone. That might be where the issues are seen, that might be where the tangibility draws our focus. We might think it possible to create new, tighter rules, better controls, stronger regulation, and enhanced monitoring and policing. But focusing on the outer layer will be the equivalent of wrapping a rotten apple up in a fine red ribbon and expecting it to be delicious.

If we want a real transformation, and I think we now know we need it, we must dig down to the core. We need to work with advisers, bankers and all in the financial services industry as people; to help them explore their hearts, minds and the deep stories that drive their actions.

We need to work with them to become the catalysts of a cultural revolution, a reshaping of the way we do things around here in the industry. We need to foster the development of businesses that focus on a positive intent for their clients, a true desire to make their interactions client-focused.

There are plenty who do this now, so we need you to become the role models of the new order. For those who are still striving and with the regulators demanding change, there is hope in people. People are amazing, they will shape the future, but people need leadership, not policing.

The beauty of the layers is that they reinforce each other. If a strong sense of duty, service and purpose is pushed out from the core, it creates the amazing outcomes at the edge. These outcomes then foster positive, trusting relationships, which push results back to the middle, rewarding the people.

By strengthening the core, we can start a powerful, self-perpetuating cycle of client success and business performance. The real question is, if we don’t dig down to the core, will we ever really change?