This series of articles explores different themes in the discussion around conduct and culture, which are interlinked and now central to the regulatory regime that surrounds financial services. Poor culture, leading to poor conduct is at the root of each scandal and crisis that has occurred.
Here we examine social norms, service standards and progress to date.
The Financial Conduct Authority
The FCA was so named for a reason. Following the debacle of 2008, regulating conduct became a thing.
Are we getting any better?
Back in the 1980s and 1990s it was commonplace, particularly on a Friday, to drink at lunchtime; shock, horror! Apparently, the financial sector was second only to the merchant navy when it came to the prevalence of alcoholism! We’ve come a long way since then and this is no longer normal. Consider this though; boozy lunches, corporate jollies and advice based on details that were written on the back of a fag packet, were business as usual!
Scroll forward to today and despite more sobriety, some things have gone backwards in a number of areas of financial services.
- It can be virtually impossible to speak to anyone.
- You may not be able to find clear information.
- There can be zero support post-sale.
I could be talking about the FCA here, but actually, I’m talking about financial services, especially the large banking and insurance institutions. These will be the ones that can cause systemic problems if they go wrong, incidentally.
Life, pensions, casualty and liability insurance are up there with utility providers, giant software companies and banks. We have all had that experience no doubt.
Social purpose
One of the main benefits of insurance companies is that they provide a valuable contribution to society. So as well as generating owner value through profits, insurers have a social purpose, or at least they are supposed to!
Insurers keep people in jobs, invest in infrastructure and play a big part in health and safety risk management. Insurers keep industry turning by paying claims when disaster strikes. The vast pension funds can fund big projects. They are huge employers. Makes you proud to be part of financial services!
The reality however be summarised as:
- Mis-selling
- Financial crisis
- Not covered
Financial services have not covered themselves in glory and even the laudable aims of insurance seem to have been dented by the short-termism, cost-cutting, and service-limiting demands of shareholders.
The business interruption insurance court case during the pandemic is a case in point. The approach of professional indemnity underwriters is another before we start on the shenanigans of dodgy financial advisers and the shortcomings of banks.
If you have had cause to make notification to your professional indemnity insurers you will know that the process is fraught with delays, impracticalities and a considerable amount of time spent on trying not to pay the claim even if there isn’t going to be one!
Frequently we encounter poor communication options, unacceptable detrimental delays in administration, and difficulty in accessing information which will cause a knock-on effect for the end customer who may be trying to access their pension to pay for something important, for example.
Despite this, from financial planning through wealth management, loans and insurance much money is made everybody is very highly paid, is it doing any good? Are our financial services professionals as valuable as doctors, nurses or cleaners?
Do what you can
Much that I have mentioned here is outside of your control, so you need to focus just on what you can control. How do you improve, enhance or save customers’ lives? Having a narrative around this is a good starting point for your compliance with the conduct rules and the Consumer Duty.
–
Karen Malin
Director
GI Consultant 