People working in financial services need to accept that “proximity to money” makes them more likely to engage in poor ethical behaviour, and take special care to foster their sense of empathy to combat this.
That is the argument criminal psychologist turned consumer psychologist Adam Ferrier plans to put to the Banking and Finance Oath’s inaugural Banking and Finance Ethics Conference in Sydney on June 8, 2017.
“Of course it is not as simple as money causing people to behave badly, and there are obviously plenty of very wealthy or highly-paid people with excellent ethics, but there are a number of studies that show the presence of money tends to make us all more self-interested and less caring for others,” he says.
Ferrier, who began his career working with prisoners as a psychologist for Corrective Services NSW, was formerly global chief strategy officer at creative media agency Cummins&Partners and before that a founding partner of Naked Communications.
“Control studies show that in a game of Monopoly, the ‘richest’ player is most likely to cheat, while real-life data shows that people who drive more expensive cars are less likely to stop for people on pedestrian crossings than drivers of cheaper cars,” Ferrier says.
Basically, the evidence is in that the bigger role money plays in our lives, the less likely we are to act like the rules of society apply to us.
“The more money influences us, the less likely we are to act like civil human beings and the more likely we are to feel we are disconnected from how our actions affect others,” Ferrier says. “There have been a lot of studies on psychopathy, how prevalent psychopaths are in the corporate world, and looking at the psychological impact of money. Overall, the research shows clearly that the closer the proximity to money, the more self-interested and less caring about other people we tend to become.”
He says that while it may seem extreme to talk about “psychopathy” in the context of the financial services industry, it is a useful way to grab people’s attention and encourage them to think more deeply about how they are influenced by money.
Ferrier refers to an individual’s “proximity to money” as distinct from how much money they have. This is because people don’t necessarily need to have access to money for it to have the power to influence their behaviour. In fact, money may exert the biggest psychological pull over us when it is a motivational tool slightly out of grasp.
What it means for financial services
This, of course, has big implications for individuals working in the financial services industry, who are often remunerated via incentive structures.
In the financial planning sector, the Future of Financial Advice reforms have sought to address how money motivates poor behaviour, while the Sedgwick Review into retail banking remuneration has called for sweeping cultural change in pay policies. Meanwhile, as the largely non-profit superannuation sector becomes more sophisticated, it faces increasingly complex questions about how to structure incentives.
Ferrier argues that the challenge of making sure monetary incentives don’t distort behaviour is particularly fraught for employers in the financial services industry.
“Most brands these days talk about how if you do what you love first, then the money will follow. Well that is really difficult when your business is money,” he says.
He argues financial services organisations need to get more thoughtful about what, besides money, might be central to their purpose and how they can use that sense of purpose to drive the right behaviour. One strategy might be to pay people less but offer them more non-monetary incentives, he suggests.
Rather than wading too far into the debate over how organisations should structure their remuneration policies, however, Ferrier is more interested in encouraging individuals to work on their personal skills for dealing with the way money influences their thinking and actions.
“If the true psychological effect of money is to make people have less empathy, then we can and should be cognisant of that and train ourselves to overcome it,” he says.
A theme of the Banking and Finance Ethics Conference will be to encourage individuals working across all facets of the financial services sector to make a personal commitment to ethical behaviour by becoming a signatory to the Banking and Finance Oath.
Adam Ferrier will deliver a keynote presentation titled “Getting to Know Your Inner Psychopath: Why it’s hard to be good with money” at the BFO’s inaugural Banking and Finance Ethics Conference, in Sydney on June 8, 2017. For more information or to register for the event, CLICK HERE.