I had a coffee with a director of a bank the other day. Not one of those nasty high-street banks, but a challenger one, with a refreshingly different approach to doing business.
Our conversation got onto the subject of culture. We agreed that, despite the world changing and consumer demand for banking services looking very different today, cultural change appears to happen at a snail’s pace in big, established businesses.
The culture within financial services firms has previously been stated as a priority for the FCA. Yet despite this focus, little seems to change.
When I interact with my own bank (a nasty high-street one, for now at least), the cultural hangover from decades of trying to sell products is apparent. It invites me in for a “financial planning review” as a thinly veiled excuse to sell to me.
This is less abundant these days but only because bank sales staff are few and far between since the RDR. There is a negative correlation between a bank sales force and qualifications and pricing transparency, apparently.
A report in 2014 by thinktank New City Agenda, along with Cass Business School, concluded it would take a generation to change the aggressive sales culture in banks which provoked a string of misselling scandals.
If culture in banks is so hard to change – despite consumer demand and despite the financial and reputational consequences of flogging unsuitable products – then what hope for positive cultural change within our own profession?
This issue has come into sharp focus in recent months due to the rising demand for defined benefit transfer advice. Rarely a day goes by without news of another firm voluntarily giving up their transfer permissions or otherwise facing scrutiny over their advice.
The plight of British Steel Pension Scheme members found its way onto prime-time television and into parliament. And the excellent CHIVE initiative spearheaded by Al Rush and valiantly supported by many others is a clear signal that cultural change in advice is desired.
Despite the FCA talking – and now acting – tough on the issue of unsuitable DB transfers, despite the media and politicians shouting about it, and despite great work by a select few within the profession, there is little indication behaviour is changing.
This is, after all, behaviour taking place despite a significant improvement to professional standards post-RDR and in an environment of transparency around remuneration.
If regulatory focus and drive from within our profession is not enough to force this positive cultural change, what is?
One option is to better educate the end consumer about what “good” looks like and help them avoid the worst outcomes. Imagine if every member of the BSPS had received a short letter warning about outsourced advice, contingent charging and esoteric investment schemes.
My fellow Money Marketing columnist Paul Lewis does an important job educating consumers about what to look for in a good adviser: independence, chartered or certified, and paying in pounds not per cent. These three filters are not guaranteed to result in avoiding unsuitable outcomes but the promotion of simple rules consumers can easily apply will do more to force cultural change than other measures.
We are unlikely to see cultural change within the big banks anytime soon and, unless we are prepared to tackle this issue differently, we are unlikely to see it within the financial planning profession either.
Martin Bamford is managing director of Informed Choice