Untrustworthy fiduciaries and the opportunity of a generation (Part 1 of 3)

Nathan Kinch
Mar 7 · 7 min read

Distrust is systemic. It’s global. It’s industry agnostic. People have lost faith in the system. For the Australian Financial Services industry, this is the challenge and opportunity of a generation.

Trust disproportionately impacts performance. It’s the very business banks are in. They’re entrusted with our money. They are expected to uphold strong moral and ethical standards. They are expected to act in our best interests. They are fiduciaries.

The recent Hayne Royal Commission has showcased everything but alignment to our expectations.

This 500+ page report, with the 76 detailed recommendations, is a call to action for the sector. Taking action represents a once in a generation opportunity for a refreshing breed of leadership.

The day after the report was released, Anna Bligh, the Head of the Australian Banking Association, made statements that echo this sentiment.

We messed up (our words)

Give us another chance (our words)

We will fix this (our words)

Time will tell if this intent is met with appropriate action.

This three-part series is written for those working in and around the financial services industry. Specifically, it will help you develop a clear point of view, clearly articulate a vision for the future of financial services and provide insight into practical steps you can take to make meaningful progress.

We will break this down by focusing on:

  1. The ethical conduct of executives, employees and contractors. Specifically, how conduct is connected to poorly designed reward and incentive structures.
  2. Wide asymmetries of power and information between providers and their customers. We will showcase how this is related to lack of design in Financial Services Guides and Product Disclosure Documents.
  3. Organisational culture and governance. We’ll detail why this is at the heart of the problems highlighted in the Hayne Royal Commission Report. Throughout this series, we’ll showcase how trust focused transformations can be executed.

Each article in the series will focus on different topics and distinct practices.

Let’s dive in.

Conduct and incentive structures

Speaking frankly, banking employees have been rewarded for misconduct. This is a systemic issue.

The Royal Commission report makes it clear that interests are misaligned.

This can be likened to the industry directly competing with its customers. Rather than prioritising customer outcomes (and valuing as a result of helping said customers achieve these outcomes), the industry prioritised profits.

The Corporations Act (2001) doesn’t help the cause. A corporation’s purpose is effectively to maximise shareholder value. More broadly, section 181(1) of the Corporations Act requires directors to exercise their powers and discharge their duties ‘in good faith in the best interests of the corporation’.

Our question; at the expense of what?

We can and must do better.

Power and information asymmetry

Information asymmetry has become a systemic issue. Information monopolies are beginning to be challenged globally.

In the Australian Financial Services sector, there is a clear and observable power imbalance. Banks know more than consumers. Banks have become information businesses.

They have access to the details of our financial lives. They gather masses of information from a variety of other sources. They buy and sell “de-identified” data sets that help power the marketing machines for the online gambling industry.

People are not informed. They are not empowered. As a result they lack the knowledge, experience and comprehension to make informed choices.

To make this tangible, let’s look at literacy rates in this country. As this article suggests, they’re shockingly low.

Now let’s conduct some quick readability analysis on the terms and conditions of one of the Big 4 banks simplest products.

This analysis was quick. Yet if I were to actually read this document end to end at a fairly average reading time, it’d take me almost three hours!

What this showcases is that the agreements people are entering into are incomprehensible, by design. And this is without considering the context of use, form factor and a variety of other variables that impact comprehension.

So let’s add to that quickly by assuming that banks want to onboard new customers to transaction accounts quickly and effectively. They likely want the entire process to take place on a mobile device in a matter of minutes.

Given this assumption, none of the above adds up. I can sign up in minutes, yet to understand what I’m signing up to, I need to invest close to three hours of my time. And I need to be part of the 1.2% of the Australian population with the highest literacy rates.

And, apparently, reading isn’t optional.

The second sentence in the PDF booklet is, “You must read this booklet along with the ‘ANZ Personal Banking Account Fees and Charges’ booklet”.

These are the tools provided to people. They should help make informed choices easier to make. These agreements should showcase value and enhance trust.

In achieving this aim, they are fundamentally broken.

Culture and governance

A clear understanding, accompanied by explicit actions, cannot be found in the Hayne Royal Commission Report. As a result, organisations need to take it upon themselves to define what culture means, a vision for how it will evolve and give visibility of tangible progress to key stakeholders.

Here’s an example directly from our work. We call it the 3C’s of Culture: Collaboration, Commitment and Consequence.

Specifically, governance frameworks that support attitudes and behaviours favouring customer outcomes should be proactively designed. This aligns directly to the point about competing with customers. We must design for alignment.

In Part 2 and 3 of this series, we will dive deeper into how ethics frameworks can be defined, designed and collaboratively tested to increase the likelihood that organisational culture supports customer outcomes. We will also showcase how differentiated, customer outcome focused thinking, can help produce more effective product and service experiences.

A vision for the future of Australian Financial Services

It’s near impossible to operate strategically without a clear vision for the world you’d like to help create. So, given this was missing from the Hayne Royal Commission Report, let’s fill the gap.

We believe the future of financial services is about people. It is not about money. It’s not about products. It’s about helping people navigate the complexity and nuance of life (by gaining access to and respectfully using their data) to achieve the outcomes they care about most.

Financial services should become life services.

This is big. But the Big 4 are in a unique position of power. The entire industry has a once in a generation opportunity to change the game. The time to start on this is now.

Here’s how

Too often behaviour is reactive. With the right approach, it can be designed. It’s worth noting, however, this cannot be ‘mandated’. That approach does not work. This has to be collaborative. It has to be a cross-functional exercise. In fact, it has to be truly participatory. Designing socially preferable behaviour means engaging with the people you serve, your customers. It also means designing for high trust interactions. Organisations that do this well are competitively superior.

This switching canvas (inspired by Re-Wired Group’s ‘switching formula’) below will help you identify, map and understand the change-making forces within your organisation. By deepening your understanding of the progress making and progress hindering forces, you can tackle this change proactively and systematically. You can make change a collaborative, participatory process that benefits all stakeholders.

We’ve added a little detail to help you get started. In fact, we’ve been identifying, mapping and deepening our understanding of these forces. We now have a canvas that represents banks, the market and the consumer population.

If you’d like to chat more about how to put this canvas to use, let’s talk.

In the meantime, we trust this gives you enough to get started. We’ll be releasing Part 2 of this series in a fortnight. Stay tuned.

Nathan and Mat

Greater Than Experience Design

Insights on the intersection of data ethics, privacy and design from the team at greaterthanexperience.design

Nathan Kinch

Written by

A confluence of Happy Gilmore, Conor McGregor and the Dalai Lama.

Greater Than Experience Design

Insights on the intersection of data ethics, privacy and design from the team at greaterthanexperience.design