It’s not an understatement to say that public trust in the financial services sector has taken a beating over the past few years, but gaining that trust back means structuring your business in a way that puts the customer first – and according to FMA chief executive Rob Everett, this is much easier said than done.
Speaking at the recent Financial Services Council (FSC) conference, Everett noted that public trust in the sector is at a historic low, and not only in New Zealand. Financial services is currently the least trusted sector worldwide, and though the trend doesn’t seem quite as severe down here, New Zealand is only just catching up to a path that many other jurisdictions globally have already taken.
According to Everett, financial services in New Zealand is currently facing its own great transition, and it has only just stepped onto the road. He says that before the end, there will certainly be more damning headlines, more organisations refunding customers, and more examination of culture and conduct from everyone under review.
“The financial services industry here is at a crossroads,” Everett said.
“If you look at every other jurisdiction that’s been through the process we’re currently going through, you would see that the road that’s marked conduct and culture failure has the same destination everywhere. An angry public, politicians demanding change and industry executives fronting up to the cameras, being forced to justify behaviour that I strongly suspect as individuals, they would never accept. But for some reason, when diluted through a corporate structure, they don’t feel quite the same level of responsibility for what’s happening in their organisations.”
In this context, Everett says that the conduct and culture review has revealed no breaches of the law – however, he acknowledged that it was a very quick review which depended largely on what the regulators were shown. Despite this, it did highlight some significant monitoring and conduct risk management problems, and addressing those will be each organisation’s starting point.
“Putting customers at the heart of the business – it’s easy to say, and it’s hard to do,” Everett said.
“It takes years of hard work on processes, risk management, governance, training and incentive structures. You have to move beyond a compliance mindset – that is, doing what the regulator tells you – and to a mindset of “how can we do this for our business, our products and our customers?”
David Talbot, CEO of UMR Market Research pointed out that this ‘shrinking of trust’ is really a global crisis for the financial services sector, and especially noted the findings of the most recent Edelman Trust Barometer – a yearly global research study into individual’s relationships with organisations.
“The latest version of the Edelman Trust Barometer has definitely got some concerning figures in it,” Talbot said.
“The good news is that trust in the financial services sector has risen from 49% to 57% over the past five years, but the bad news is that as a sector, it’s still the least trusted of all the sectors they measure. So there’s no room for complacency, and this is definitely the right time to be having this discussion.”
Life insurers got a particularly bad rap in New Zealand’s conduct and culture review, and according to Fidelity Life CEO Nadine Tereora, the responsibility is now on each company to demonstrate their focus on customer – not simply to say that it is being done. She says that although public perceptions of insurers can sometimes be misguided, restoration of trust is still very much on each insurer’s shoulders.
“We’ve been on a customer journey for the last three years, and it’s really important that we continually step up to putting customers at the heart of everything that we do,” she explained.
“That’s not just about talking about it – it’s about actually demonstrating that we are.
“We’ve paid just over $1 billion in claims, and that’s a really important service – we’re there for New Zealanders at their time of need. We need to get the balance right around educating them on that part of the story, but also in restoring trust with customers in our sector. Restoring trust actually does start with us.”