How to re-build trust in financial services (Part 2 of 3)

In the first part of this series we briefly looked at the current state of the market in Financial Services. We narrowed in on 3 areas from the Hayne Royal Commission. We then provided a vision for the future. We finished by discussing what financial services organisations can do to make progress.

This article will focus on helping you develop the strategy, execute the tactics and evolve the measurements that increase trust and maximise value.

Specifically we will cover:

1. How organisational transformation starts with bold leadership and big commitment
2. How to design new incentive systems that are aligned to the real metrics your customers care about
3. How online legal agreements can be redesigned to support and empower your customers to make more informed choices

Let’s dive into the detail.

Organisational Change

One of the key recommendations from Hayne was about culture and governance. Although the details were light, the emphasis was clear. It’s up to industry to drive this change, with APRA supporting and overseeing the process.

This requires bold leadership.

Boards are responsible for setting the strategy and direction of the organisation. For time horizons both long and short. They are responsible for effectively identifying and managing risk. They must embrace uncertainty. They must make the hard choices. That is their mandate and leadership is the essential ingredient.

Taking action on the 76 recommendations set out in the Hayne Royal Commission Report requires a new breed of leadership. “Leadership 4.0” as defined by World Economic Forum founder, Klaus Schwab.

“We need leaders who are emotionally intelligent, and able to model and champion co-operative working. They’ll coach, rather than command; they’ll be driven by empathy, not ego. The digital revolution needs a different, more human kind of leadership.”

These are the types of leaders that will lead the 4th industrial revolution; characterised by masses of data, integrated and accessible in real-time, by machines and empowered employees and customers.

You can easily use authority at the board level to mandate change and accelerate transformation. But we all know this does not work for the moving target of company culture. Progressive leaders create the authorising environment for great people to execute. They support people in owning their roles. They enable collaboration, inspire commitment and emphasise consequence.

They author and drive the narrative.

Check out the interactive version here.

Incentive Structures

Financial Service incentive systems are broken. The primary reason is misalignment to the customers a given organisation serves. Specifically, misalignment to the outcomes they care about most. We need new customer and business metrics if the market is to make meaningful progress.

So how to define these metrics?

It starts with deep qualitative research to understand your customer Jobs To Be Done. Our 2017 playbook showcases the specific steps you should take to execute this process.

Doing this will help you understand the outcomes your customers care about most. It will help you discover how important these outcomes are at any given point in time. It will also help you develop a deep understanding of the types of expectations your customers have surrounding the pathway to achieving that outcome.

This understanding will help you develop metrics that are inherently customer-centric.

We’ve gone to the effort of doing a lot of this work. The result is our VME Framework.

With a deep and actionable understanding of Value, Meaning and Engagement, you can begin designing new incentives structure. These structures will be directly aligned to customer outcomes.

Customer Agreements

One of the things that Hayne recommended is better disclosure, particularly in Financial Services Guides and Product Disclosure Statements. Part 1 of this series showcased how legal agreements make informed consumer choices near impossible.

The reason for this is clear. Agreements are not designed to help customers make informed decisions. They are not designed to enable valuable, meaningful and engaging customer outcomes. They are designed to protect organisations.

To make progress we need to get clear on the outcome we are designing for. We need to design experiences that are comprehensible and actionable for a variety of people, regardless of their literacy.

How isn’t all that hard. The industry needs to invest in designing experiences that;

1. Lead with values
2. Break components down and utilise layering techniques
3. Diversify the form factor (video as an example)
4. Offer contextual guidance
5. Give visibility of tangible progress
6. Delay the core action
7. Clarify consequence ( both + and -)
8. Give people a receipt (+ enabling them to review it at any time) of the agreement they’ve entered into

Here’s a detailed article explaining how to do this.

But here’s the problem. Organisational change, incentives structures and customer agreements cannot evolve in a silo. They need the backing of an ethics framework.

Ethics in the information economy is hard. Bloody hard. It requires an organisation to define its purpose for existence, document its explicit and implicit values, and define the things it will fight to protect — its principles. This is all before it designs and progressively operationalises the business functions that will bring its principles to life.

This will be a key topic of Part 3, our playbook for rebuilding trust in financial services.

If you’d like to get your hands on a copy of this new playbook, send us a note.