Those working in financial services have a responsibility to “dig down” into the ethical implication of the products and services they sell as these often morph away from what was originally intended, Banking and Finance Oath (BFO) co-founder and director Clare Payne said.
As financial service providers are custodians of other people’s money, they should not operate outside of society’s norms, Payne told delegates at Investment Management Consultants Association (IMCA) Australia’s annual conference in Sydney on Monday November 28, 2016.
The theme of the conference was How Deep Should You Dig? (and Whose Responsibility is it Anyway?). Payne urged delegates to think about why they should dig into ethical questions.
“One reason is that things can morph; the circumstances can change, the financial markets can change, and the practice can no longer be acceptable, when in the beginning it was okay.”
In an overly complex sector a certain amount of digging should be required to understand and feel comfortable with things, she said.
A burgeoning need to engage with many different stakeholders means that if an investment or business practice raises issues of concern for any of those stakeholders it needs to be examined.
“If you are concerned about something you have to keep digging until you get comfortable with it. If you think there is nothing to dig into then you should really think again,” Payne said.
Local Government Super director Jeff Morris told the IMCA gathering that the industry must push for ethical change from within, as the regulator would not put sufficient pressure on the big end of town for change to occur.
Morris is a former Commonwealth Bank of Australia (CBA) financial planner turned whistle-blower and critic.
He was speaking at the conference in a personal capacity as a whistleblower.*
He said the ongoing abuse of consumer trust within the financial services industry makes it imperative for ethics to be applied across the sector, but he did not expect the regulator to do much about it.
“I wrote a piece a little while ago where I compared the CBA to a crime syndicate. Basically, what would happen is occasionally a few little low-level street operatives would be picked up by the ‘cops’, but the syndicate itself kept rolling on like the Mississippi,” Morris said.
The CBA says it is repairing the damage from unscrupulous practices that happened between September 1, 2003, to July 1, 2012 in its financial planning business, partly through an open advice review program for customers, which has offered approximately $11 million in compensation.
A report from the Australian Securities and Investment Commission (ASIC) in October 2016 found that CBA financial planning arm had again failed its customers, charging them for advice that was not issued.
Morris said ASIC would “take a few cheap scalps” from a few financial planners and pat themselves on the back for a job well done, but would then “roll over and let the big guys tickle its tummy”.
“When you’ve seen it from the inside … you realise there’s a serious problem that goes to the heart and head of the industry,” Morris said.
The article was updated on 30/11/2016 to clarify the role in which Morris was speaking.