Driving an ethical culture

I don’t think there is any doubt that the culture, and consequently, the ethical behaviour, of some financial planning practices and individual planners over recent years has been dubious. The number of practitioners being banned by ASIC continues to grow daily. Will mandating that all practising advisers need to complete an ethics subject though fix the problem?

I certainly don’t think it hurts and I appreciate that you need to start somewhere. However, it seems to miss the bigger picture issue, which is that culture and ethics are led from the top.

As articulated in the latest ‘Global Business Ethics Survey,’ senior management play a critical role in setting an organisation's ethical tone. ‘Employees tend to follow leaders' cues for both good and ill, which makes it especially problematic when leaders break rules or violate standards of integrity.’

While many practice leaders are also practising advisers, is it reasonable to assume that this is the case in all instances? My experience says ‘no’. Many financial planning firms have senior leadership positions that are held by non-practising advisers who are not obliged to complete the subject. The question therefore begs, what support are these senior leaders and mentors, the ones who are ultimately empowered to create and drive an ethical behaviour, being given?

Now for those of you thinking, ‘I don’t need any assistance in that area, we’ve got a great ethical culture in our workplace; no one would ever act unethically,’ I challenge you to write down the top two to three values that describe what is most important to your organisation and then ask the same question of your employees. If your employee responses don’t mirror yours and aren’t inclusive of words like ‘humility’ or ‘accountability’, there is work to be done.

A second and separate question is whether the principles that you identify as ‘key’ depict the virtues that really define and drive your business, and that you are 99 per cent more committed to them than your competitors. Read this to mean I am not talking about values that sound nice, but really, when push comes to shove you will find a way to justify why you compromised them. No, what I am talking about are the two to three values that distinguish you from your competitors, because they are so important that you will prioritise them above everything else.

Take for example South West Airways whose mantra is ‘employee’s first’. Several years ago, when the airline industry in America wasn’t performing particularly well many airlines made redundancies. It would have been entirely reasonable for South West Airways to also follow this path, but it didn’t. True to the idea of ‘employee’s first’, the company retained all of its employees and instead, chose to post losses.

Yes. That’s right, there will always be a cost associated with having strong values.

Equally, there also are many benefits to be had. In particular, you provide your employees with a common language and clarity around what is important and what isn’t. When people have clarity it is much easier for them to make decisions around who to hire, what training to undertake, which clients to engage and third parties to partner with.

Now just to clarify, I am not suggesting that we should extend the FASEA Code of Ethics training to senior leaders. However, the if the industry is genuinely serious about improving its reputation, consideration must be given to how it supports senior leaders and mentors to create, model and over communicate an ethical culture focused on putting clients first.

Ignoring their fundamental role in addressing the situation, or worse still, assuming that, in light of the royal commission, senior leaders will surely be risk adverse and take a more ethical approach, seems like a flawed approach. Particularly when you consider that unethical behaviour is typically driven by an erosion of the ethical implications of our actions, and so we end up engaging in or condoning behaviour that we would condemn if we were consciously aware of it.

As Louis Gerstner, former CEO of IBM said, ‘Culture isn’t just one aspect of the game, it is the game. In the end, an organisation is nothing more than the collective capacity of its people to create value’.

Christine Bau, principal, People Focused

Adrian Flores

Adrian Flores is a deputy editor at Momentum Media, focusing mainly on banking, wealth management and financial services. He has also written for Public Accountant, Accountants Daily and The CEO Magazine.

You can contact him on [email protected].