Australia’s financial services industry should prepare for an onslaught of vote-gathering criticism in the country’s upcoming general election, according to Maria Wilton, chair of the country’s CFA Society Diversity Committee.
In Auckland earlier this month at the launch of the new NZ CFA Society associate membership category, Wilton said the ongoing Royal Commission (RC) into financial services would feature in the next Australian election campaign – slated for any time between August this year and May 2019.
“The Royal Commission came about out of a political process; it will have a semi-political outcome,” she said. “Political party responses to Commission will undoubtedly form part of their platforms.”
But while there was a danger of political competition for “who can punish banks the most”, Wilton said pragmatic solutions should prevail if the industry steps up.
“There will be a regulatory response as well [to the RC] but we can’t rely on it,” she said. “Regulators are inevitably late to the party – the financial services industry is great at innovating and the regulator is always catching up.”
According to Wilton, the financial services industry in Australia (and by association, NZ) has some work to do in rebuilding trust with consumers in the wake of the RC.
She said there were three important components that would underpin a more trusting relationship between the public and the finance industry.
“Credentials are one part of it,” Wilton said. “But we also need to the diligence to understand what clients need and not just sell them products. And an ethical framework that focuses on culture and conduct.”
The RC could also accelerate the break-up of complex, ‘vertically integrated’ financial services groups, Wilton said.
She said while some of the individual behaviour exposed in the RC has been “shocking”, the public hearings also revealed some large, unwieldy vertically-integrated firms had proven “too big to manage”.
“Smaller operators should have an advantage after the Royal Commission,” Wilton said.
At a more granular level, she said the RC could also bring pressure on directors of financial services firms to take accountability for culture and conduct rather than simply pushing for shareholder profits.
“The role of directors will come under more scrutiny; they’re going to need to be more hands-on in understanding what’s happening the businesses,” Wilton said. “So directors won’t be able to serve on many boards at the same time as they tend to do now.”
Internally, financial services firms will also have to work harder to understand the weak links in their client servicing models, she said.
“The upshot is that rather than saying ‘gee isn’t it great we have resolved 95 per cent of our customer complaints’, businesses will now have to focus on understanding what’s wrong with the other 5 per cent,” Wilton said. “Consumers are in the box seat.”
As well as her CFA duties, Wilton is currently an adviser to Franklin Templeton Investments Australia and director of Victorian Funds Management Corporation. Previously, she held a number of senior funds management and director roles in Australia including 12 years as head of Franklin Templeton ending in January 2018.