In three sentences, AMP CEO Alexis George offered a stunning admission unthinkable by a financial services executive just a few years ago.
“If we go back into cross-subsidisation of whatever products with advice, you end up with conflicts,” George told the Professional Planner Licensee Summit in the Blue Mountains a few weeks ago.
“And, as anyone who lived through the [banking] royal commission will know… we got ourselves into trouble because we weren’t able to manage the number of conflicts that existed. Advice should be valuable for advice.”
It was not the first public mea culpa made by a leader of AMP since the royal commission. The iconic wealth manager – which was accused of criminal wrongdoing by the commission and has lost 70 per cent of its market value since – has apologised multiple times for the harm caused by its past misdeeds.
But nonetheless, it is worth reflecting on just how much things have changed. For years, industry figures whispered about the ills of vertical integration. Journalists, including yours truly, wrote detailed questions about the subsidies and incentives in place. They were consistently denied or ignored.
So, it is a big deal that, five years on, we are now finally able to have a candid discussion about the conflicted models that were widespread (if somewhat secret) not that long ago. The answers to those questions are now belatedly available for any Australian to read in the form of Kenneth Hayne’s final report.
The royal commission came at a great cost to the industry: commercial, reputational and emotional. But looking back, the painful truth-telling process was necessary – not only because it provided to many victims a sense of justice, but also because it has allowed the broader financial industry to reset its relationship with the public and the press.
Arguably, it is only because of that reckoning — and the more honest communications we now hear from our industry leaders, that we can even fathom the kind of discussions now being held with government about winding back some of the more onerous red tape imposed on the industry over the past two decades. In other words, it has been an important part of the industry beginning to regain the trust upon which its services have relied for centuries.
Tell a more positive story
The great upside of no longer wasting energy deflecting questions about misconduct and conflicts is that the industry now has an opportunity to tell a more positive story, one that reflects the great bulk of everyday activity in the financial system.
That is not to say that we should shy away from tough conversations or continuing to ask those curly questions. Indeed, that is at least as equally important a function as promoting the industry’s social value (and one the trade and professional associations are often unwilling or unable to perform). Conexus Financial, this website’s publisher, and its founder, Colin Tate AM, were passionate advocates for a royal commission (even though it was arguably not in their commercial interests to do so). Separately, then writing for a competitor, so was I. That alignment of values is one of the reasons I have long admired, and now joined, the business.
But misconduct and greed is not the full story, especially not anymore. So, under my tenure, it won’t be the only one we’ll be telling.
The victims of historic misconduct deserved to be heard and championed. But so too do the organisations and individuals who have re-committed to the industry, despite the searing public shaming of that inquiry, in order to help Australians live more fulfilled financial lives and retire with dignity. Many of the major players have quit trying, and the prosperity of millions of households is dependent on the success of those who remain.
A critical role
This is where the specialist financial services media can play a critical role. To its credit, the mainstream media has begrudgingly started to pay attention to some of the industry’s pressing issues, such as the evidence presented by Allens partner Michelle Levy in her Quality of Advice Review.
But, more often, it continues to wheel out outdated tropes about industry misconduct which do not accurately reflect the significant changes to business models and industry practices in the past five years. A case in point was the sensational expose of the self-confessed “terribly unlawful” conduct of Shaw & Partners “financial adviser” Kris Ridgway by The Sydney Morning Herald and The Age last year, splashed all over Page One of two metropolitan newspapers. For sure, Ridgway’s alleged conduct was worthy of bringing to light and this column makes no comment on the veracity of the investigation (aside from suggesting the term ‘adviser’ may be dubious, given he was clearly a stockbroker).
But it is not every day that a finance story graces the front page of a mainstream, non-business publication. And it is telling this was the one that tickled their fancy. It seems likely the editors responsible were inspired not just by the public interest, but by their own affection for a media narrative that is largely reflective of the past, not present or future.
Sometimes, these stereotypes are born not of prejudice, but ignorance. Many Australians (too many) have little or no lived experience of dealing with the industry, other than the pension fund they were defaulted into and tend not to engage with until much later.
Leadership and advocacy
By contrast, publications like this one have a privileged view of the good work its readers do each day. That allows us to increasingly play an important role not just providing information or opinion – both of which in a democratised and often toxic digital and social media landscape are effectively commodities – but leadership and advocacy.
And there is no shortage of topics on which the industry needs assistance advocating. On financial advice, there is now consensus that 90 per cent of the population is an unacceptably large proportion to remain unadvised. But there is a lot of uncertainty about the ability for new and critical business models to emerge and thrive.
Similarly, institutional investors, especially in the super and pensions environment, face the very serious challenge posed by the politicisation of capital allocation, as so well articulated by our sister publication Top1000funds.com. As the “ESG movement” attracts powerful enemies and enthusiasts around the world, executives and their portfolio managers face the thorny task of honouring their fiduciary obligations against the backdrop of noisy and dangerous culture wars.
And that is largely the point. Our readers have a fiduciary duty to consumers, whether advising them or acting as trustee of their retirement savings. Those who understand the profound nature of that legal duty – including the industry press – must help advocate for and protect it.