By the end of today, the Australian government will have received the final report from the Hayne Royal Commission.
By Monday evening, the Australian public will also be aware of its contents. However, many are making informed guesses already.
Revelations of fees charged to dead customers, people with disabilities targeted by unscrupulous insurers and senior couples forced to give up their dreams of retirement have shocked, appalled and reinforced some Australians’ views about our financial giants.
If we know one thing about the final report, it’s that the financial services sector will be told they have to clean up their act.
But the next question is: “How do they do that?”
Speaking to an audience of finance executives and media, Dr Simon Longstaff, executive director of The Ethics Centre, said financial services firms can’t fake ethics, or pursue them for the bottom line.
“If you do it for the dividend, you won’t get the dividend,” he explained on Wednesday.
“It’s not a Pollyanna-world where every ethical decision is met with instant rewards. It’s a case of being ethical for its own sake. The rewards of trust only flow to the trustworthy.”
While he noted the majority of Australians have acceptable experiences with their financial services providers, he reminded the financial services that stories – like those heard at the Royal Commission – are more powerful than facts.
So the financial giants of Australia need to convince the public that they can actually be trusted.
“It cannot be fixed by being better than competitors at such things as service or product design, and getting all the nuts and bolts right.
“More than that is required. It all comes back to principled behaviour,” Longstaff said.
“As comments by Commissioner Kenneth Hayne imply, he wants the industry to be ethical, not merely to be compliant for fear of being discovered and punished.”
Rather, executives and leaders need to build and consistently refer to the ethical standards they should stand for.
It comes down to human decency
Commissioner Hayne referred to these as the simple ideas of common human decency.
In his interim report, Hayne said the basic standards of fairness and honesty are very clear, and questioned whether the law should in fact be simplified to “reflect those ideas better”
Stripping back questions around the technical legality of systems which facilitated excessive or unnecessary fees, banks, insurers, advisers and funds need to consider if what they are doing is the right thing by their customers.
This will mean taking the odd financial hit, Longstaff warned.
But over time, the “trust dividend” will become more valuable and eventually outweigh any short-term losses.
“If the industry understands its purpose and the standards and principles that underpin it, and acts on them, it will be able to navigate all the legal shoals it might encounter,” the director said.
“It will have a compass and a purpose that will help achieve ends other people will accept as reasonable.”
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