Technology is key to ethics and good governance in financial services

When parliament returns today there’ll be plenty of debate about business ethics, especially as it applies to banking and financial services.

The idea of a royal commission into the Australian banking and financial services sector has become a major election issue, with key players on both sides coming out loud and strong.

The Federal Government and the industry say we have a robust financial system overseen by two regulators that survived the GFC – so hands off! The opposition, the union movement and some consumer advocates say we need a royal commission, because financial institutions consistently fail to act in customers’ best interests.

When parliament returns today there’ll be plenty of debate about business ethics, especially as it applies to banking and financial services.

The recent Four Corners story on Comminsure gave a very human face to the latter narrative.

The issue extends well beyond parliament. Recognising that “there are examples of egregious and unacceptable behaviour in some organisations”, Australian Institute of Company Directors CEO (and former Financial Services Council CEO) John Brogden said that directors need to be “creating and nurturing the right culture” and setting the “right tone from the top”.

Brogden called for high level meetings with Treasury. But amongst all the talk of culture, tone and royal commissions, another crucial contributing factor is overlooked: technology.

Meetings, standards and worthy statements of intent are no match for giving your people the tools they need to provide an ethical customer experience.

Take the financial advice sector as an example. Most advisers I know put their customers first and don’t need another lecture on ethics. But too many are wedged between increasing customer expectations and old-school, poorly integrated technology.

There’s still way too much paper, and even where there are half-decent tools, they’re too hard to configure to the business’s real needs. The result? Inefficient processes that force advice teams to find shortcuts. And shortcuts and compliance don’t mix.

So what’s the answer? Invest in technology that empowers advice staff and delivers the transparency needed to create the right business environment.

Plus, old-school advice systems are too hard to integrate. If technology doesn’t show that the customer has, say, insufficient life insurance cover to match their risk profile, the adviser has to work so much harder to ensure their recommendations are in their client’s best interests.

The situation is even worse for management. Their tools for monitoring and supervising advisers are disconnected from the advice process, leaving them running audits and handling complaints well after mistakes are made. They just don’t have the technology to drive ethical financial advice proactively.

So what’s the answer? Invest in technology that empowers advice staff and delivers the transparency needed to create the right business environment.

First, every relevant piece of information needs to be immediately at hand so advisers and management can make the right decisions.

Second, systems need to constrain advisers to be compliant without compromising the flexibility they need to provide personal service and run a great business.

Third, management needs visibility. Compliance managers need ready access to advice-in-progress against the accreditation level of each adviser. They need reporting that indicates how much advice is being written in high-risk areas.

Finally, you need detailed audit tracking embedded into the system, not scribbled on pieces of paper somewhere. And that needs to be married to compliance information from other sources, whether it be client complaints, adviser audit results or remediation activities.

Getting these four dimensions right takes careful thought and some investment. But it’s so much more effective than yet another meeting with Treasury.