In an interview with the Australian Financial Review, Mr Medcraft said bank subcultures are failing to meet community expectations because efforts to improve culture are not taking effect within departments further down the organisational ladder.
“I think the problem is that by the time it gets to the middle it’s white noise. Many big banks have subcultures … and the problem is breaking through,” he said.
Mr Medcraft said that while the big banks recognise the importance of good culture and setting the tone from the top, “…the hardest thing for many of them is to recognise if you’ve got a subculture that is in conflict with the values you want to drive as an organisation.”
“Stop saying it’s a few bad apples. At some point you’ve got to look at the damn tree and say, what’s wrong with us as an organisation? That’s what I am saying to these guys,” he explained.
The chairman said there will be significant consequences for banks who fail to act on improving consumer trust, “These days, the bigger that gap in trust the more prone you are to being disrupted.”
As reported by ifa, ASIC has taken action against the big banks over the past year for a range of financial advice failures and allegations of wrongdoing.
In addition, in December, ifa reported that ASIC is set to receive product banning powers and is expected to seek expanded enforcement and penalty powers in 2017.
Mr Medcraft said the new powers will be a priority in 2017, however ASIC will focus more on “fine tuning” products rather than banning them outright.
Fish rot from the head first. As long as you have senior managers who can only manage people and divisions by the numbers they produce, then you are always going to have a culture of “meeting the numbers at all costs”. Bank Execs are mindless idiots devoid of any leadership skills, marching to the tune of their equally devoid superiors, who can only mange people by spreadsheets.
Banks need to dispense with the Technocrats they have nurtured and instead find Execs who can bring out the best in their people’s ability to take the best possible care of their clients. Bank Execs will never understand that they will make more money if they take good care of their clients and motivate their staff to socialise, not marginalise or segment, their clients.
If you want to change a bank’s culture, then you need to dispense with ALL numerical KPIs. Even NPI is a stupid KPI that promotes the opposite to what was intended. Alas, because the banks’ culture has long since lost the ability to bring out the best possible humane aspects in the service their bank staff provide, then the fish will continue to rot and ASIC will forever be fining and sanctioning banks.
The reason non-bank aligned planners do better than their bank-owned counterparts is because they know how to look after clients so well that they refer their friends. The banks have stuffed this up so badly that they are all considering, or have already decided, to sell-off their financial planning arms. What a shame result in this 21st Century. It is not just the culture that is wrong, it is every aspect of how staff are motivated and measured that is utterly destructive. If you are a bank Exec and you are reading this. and you completely disagree, then I am afraid that YOU are part of the problem.
It is still only 5% that are corrupt, but if that 5% is high in the tree they are safe they own patch of turf. The banks need to take a serious look at middle to upper management in regard to these issues,
It’s nice to have a good culture and a good attitude to customers but what really counts is behaviour which is largely driven by what’s rewarded. Unfortunately CEOs tend to be rewarded mainly by short term financial results
Well said Mr Medcraft. The culture isn’t going to change anytime soon. The culture of a bank is to make money. They can’t ever and won’t ever manage conflicts of interest appropriately.
I look forward to the day when we look back and say ‘remember when banks were allowed to have their own financial advisers? – what a joke that was’.
“I think the problem is that by the time it gets to the middle it’s white noise.” Oh the poor sainted CEO’s, struggling to change the behaviour of those evil middle managers. For god’s sake, remunerate, reward and resource them to produce the behaviours you’re after and the culture will follow. Stop talking culture and values, start talking behaviours and practices.
This explains Medcraft’s “all advisers are criminals and all accountants are saints” approach to regulatory enforcement. Surely we need someone a bit more balanced as head of ASIC?
At least he has the guts to put his name behind his comments…
The “damn tree” is a product of the 4 pillars policy, or more accurately…the ‘protectionist’ policy of the government that limits competition amongst the banks. To that you could add the overweening regulation of the entire financial services sector, which creates the poor culture, stifles innovation, keeps barriers to entry high, protects ‘lazy’ incumbents and creates the wrong incentives. The end result is a moribund industry with few choices, high costs and a huge question-mark over its relevance and/or ability to ‘deliver’ to consumers. The surprise is that anyone should be surprised.
Your comments are on the money, but the terrible regulator has no idea what they are doing. good thing is that financial advice as an industry is dying a slow death.
Medcraft is right. The banks blame rogue advisers whilst conveniently forgetting that they built the culture.
The amazing thing to me is that many in the banks feel they have been harshly judged.
A word of advice, think of your clients first ,second, last and always and the rewards will follow
this will never happen, the banks and other product manufacturers won’t allow it. instead, all small independent advice businesses – the only source of competition for them – will (are) die a slow death. the banks are too big to fail, no one can touch them, the regulator knows, the politicians know this. they are untouchable. this will continue forever. no one is going to read your comments, they will fall on deaf ears.
Under the current industry view (and a self serving one at that) you are correct but the reality is that I worked for a major insurance company years ago where the ideal culture Medcraft talks about was present. Yes there were individual bad apples but those advisors that made 6 figure commissions were those who put the client first. They didn’t even have to work hard for it as their customers referred their friends because they trusted them. That has gone in todays society because you just can’t trust them to do the right thing by the client.