A key driver going forward will not be the consumers of today but those rapidly coming up on the inside trackandwhose values will demand better behaviour.
Mark Davies (pictured) is managing director of Link Mortgage Services
In my last blog I referenced recent regulatory guidance that addressed the issue of building a customer-focused culture. To recap, the regulator states ‘Executive committees and the Board are responsible for ensuring the functions that provide customer support in line with this guidance are appropriately resourced and demonstrate a supportive, customer-focused culture.’
This statement belies a notion that trust in Financial Services remains in too short supply. A couple of years ago, Andrew Bailey, former chief executive of the FCA, delivered a speech that addressed the financial crisis of a decade ago, and the subsequent revealing of serious conduct problems in many areas of financial services that have damaged our sense of trust and what trust should entail.
He said: ‘Trust therefore has a moral and ethical dimension to it, and it involves commitment. To be trustworthy we have to meet our commitments to others, and that in turn depends on us knowing how they have interpreted our commitments, the hope they have put in us. There is an inwardness here, the more trusted you are the more opportunities you will have to show and demonstrate that trust. We have seen that in financial services – but once trust is lost, it is hard to recover."
In the wake of the financial crisis, regulation needed to address an imbalance between overseeing firms and the individuals in them - particularly senior management.There has been since then aclearshift of emphasis towards individuals because ethical standards are most obviously visible in individuals, and more particularly the senior management.
It’s a work in progress. But a key driver going forward will not be the consumers of today but those rapidly coming up on the inside trackandwhose values will demand better behaviour.
Millennials, for example, have very different expectations of companies and trust looms large when it comes to how environmental, social and governance issues influence where they invest their money.
A2015 study by Deloitte said that nearly $24trn of wealth would be transferred in the U.S. over the following 15 years, while a separate 2017 UBS studypredicted millennials’ could be worth that amountas soon asthis year.
Millions of millennials are poised to receive more than $30trn of inheritable wealth by 2025, according to JPMorgan Private Bank and according to a recent Morgan Stanley survey, 90% of millennial investors cite generating an ESG impact as a central goal of their portfolios.
Half of the global workforce is now made up of millennials and a large majority of them — those born between 1981 and 2000 — are digital natives and are purpose-driven.
They want to work for and be associated with businesses that incorporate environmental, social and governance (ESG) goals,they want to work for managers they can trust– not those that consider these goalssimplya ‘cost of doing business’.
If trust in financial services remains an aspiration rather than becoming a way of being (both externally and internally for organisations) we are unlikely to meet the expectations of the new generations of shareholders and investors and they (via fund managers) will likely punish us for it.
Companies need to start building trust of their own accord if they want a better futureand as the regulator has already acknowledged that is the job of the individuals and in particularthe senior leadership within them.It has to come from within if it is to be authentic.