Successive Australian Federal Governments, and indeed many others around the world, have seen economic deficits balloon over the past decade to levels so staggering, that the numbers involved seem impossible. Still, these deficits will be addressed through prudent fiscal policy. The gap is quantifiable, although immense, and proven strategies for dealing with the complex nature of balancing spending with earning can be employed to achieve balance. Or so the theory goes.
The past year saw a different type of deficit balloon across most aspects of the Australian financial services landscape. A deficit in trust.
Cynics would argue that trust is perpetually in deficit where it relates to matters financial. But, even by their standard, 2016 was an exceptionally poor year.
With superannuation, advice, insurance, lending and retail banking all sharing the gong for trust erosion through scandal, the question is whether they can collectively turn it around.
It’s not an easy problem, or suite of problems, to solve. They vary by sector and they vary in scale. But, when viewed in aggregate, it’s easy to see why the Australian public think the financial services sector has a brand problem.
Let’s take a look at superannuation, insurance and advice.
The trust problem for superannuation funds is mostly self-inflicted. For many Australian’s there’s a deep-seated lack of trust in anything long-term. For superannuation, that manifests as a lack of belief that funds will deliver a meaningful return over time.
Just like Bunnings has made every moderately able weekend warrior think they’re a builder, self managed superannuation funds have created an outlet for those with delusions of investment grandeur.
Put plainly, there is a lack of trust that APRA regulated funds of either persuasion will deliver a better return than going DIY.
There is a lack of trust that APRA regulated funds of either persuasion will deliver a better return than going DIY
There is more than enough evidence to refute this, but with local media being obsessed with short term performance, every fluctuation in performance feeds the lack of belief.
Rather than shift the conversation, the industry has focused on promoting annual returns and awards. These only serve to keep the focus short-term and provide the naysayers oxygen.
Some parts of this are easy to address, but shifting our culture away from passionate self-belief is tricky. Just look at Bunnings profits.
More easily addressed is the lack of trust created through industry in-fighting. The constant refrain from both retail and industry funds that the other can’t be trusted, is unhelpful to say the least.
Imagine if Toyota started advertising its cars by saying not to buy a Mazda because the brakes are sketchy. Or Qantas promoted itself by saying that Virgin don’t maintain planes.
Content such as that contained in the recent Joint Parliamentary Committee submission by Bernie Fraser is another example of low-brow self-promotion at the expense of trust in the industry.
Shifting to promote benefits rather than seeking to accentuate perceived weaknesses in others would result in a massive change in public perception. The current conversation echo’s parliament, and let’s face it, no-one trusts any Australian political party at the moment.
It’s fair to say that 2016 was a shocker for the insurance industry. General insurers and life insurers all took huge hits to credibility. Most would agree that CommInsure took the heaviest blow. Getting an explicit mention in APRA’s submission to the Joint Parliamentary Committee on the life insurance industry, certainly stings.
Trust is a fickle friend, it’s hard won and easily lost. Across insurance there are more own goals, missed opportunities and self-inflected wounds at the root of the trust conundrum than actual issues.
An opinion piece by Adele Ferguson, criticising both the approach and findings of the recent Deloitte independent review of CommInsure, highlights the ease with which media can manipulate the trust deficit.
Rather than confront or defend, the industry should be collectively broadcasting the good news stories
Ferguson tugs on an emotional chord with readers, one that shouts ‘you can’t trust these insurance bastards!’ CommInsure is the target of the moment, but this emotional approach is a familiar refrain.
Drawing on emotion is easy, especially when trust is low. Rather than confront or defend, the industry should be collectively broadcasting the good news stories. After all, they far outweigh the genuine errors.
I don’t mean each insurer wheeling out the ‘happy customer’ cliché, I mean a genuine industry-wide communication exercise, from parliament to the classroom, that puts the positive facts on the table.
There’s more than enough positive emotion to drown out those in the media with a vendetta. It’s also important to acknowledge past failings and to make good where appropriate. But that should be part of the discourse, not the only conversation.
When I think of industries with a branding problem, financial planning is at the top of my list.
Whether you see rogue operators, poor transparency, repeat offenders or the general perception of product flogging as the biggest issue is moot. They all get an airing on a seemingly interminable cycle.
The fabric of the relationship between a financial adviser and a client is almost entirely predicated on trust. The arguments and counter arguments about the integrity of those in this profession that are played out in the media, have eroded that very fabric to tearing point.
Many advisers that I speak to have not managed to bridge the relationship gap beyond financial products
The reality is simple. The vast majority of financial advisers are good, honest people with a genuine desire to help others enjoy the lifestyle of their choosing. So why the lack of trust?
Scandals are only one factor, undoubtedly a crucial one for some clients. But I think the issue runs deeper than that. Many advisers that I speak to have not managed to bridge the relationship gap beyond financial products. All roads still lead to an SoA.
That the industry conversation is only now talking about goals or objectives based advice is double-edged. It’s indisputably the only path forward, but to an informed audience it raises the spectre of ‘what was happening before then?’ That the Best Interests Duty (BID) had to be legislated raises that same doubt.
Increasing doubt results in diminishing trust just as night turns into day.
As with superannuation and insurance, the financial planning industry needs to unite to bring the positive voice to the table.
For each of these sectors, the conversation needs to move from being about the industry to being about its customers.