Blog: Culture and diversity in financial services
Culture and diversity in financial services
Earlier this month the Association of Financial Mutuals and the Building Societies Association launched the ‘Manifesto for Financial Mutuals’, to highlight to the political parties ahead of next year’s general election, how a more effective regime for financial mutuals would help consumers to get a fairer deal from the financial services industry. Our proposals largely support existing government policy to restore trust in the industry, and to ‘promote diversity and support mutuals’.
In the few days since, a host of new reports has further strengthened these messages:
• The Social Markets Foundation on Monday launched a report on “Good culture: does the model matter in financial services?”: which found that most people believe financial companies put the interests of shareholders ahead of customers. Their report sees a need to improve corporate diversity in financial services, as a means of protecting and supporting consumers, and that establishing the right culture is key to this. Speaking at the launch event, the Economic Secretary indicated that people are “sick and tired of the scandals in financial services”, and explained the extensive work underway to address failings in corporate culture, including work to promote new sources of finance including via mutuals. In turn, Mark Austen, Chairman of LV=, who sponsored the report, emphasised how their values deliver a good culture and how this in turn has stimulated their recent success.
• Also on Monday, the Building Societies Association issued an updated corporate diversity index for financial services, which showed a decline in diversity in the mortgage and savings markets in 2013. Commenting on the report, the Economic Secretary stated that “Corporate diversity is vitally important in financial services… to help customers get a better deal”.
• Another think tank, New City Agenda has today launched a report on the culture of retail banking in the UK, citing that British banks have since 2000 paid £38 billion in fines relating to their retail businesses, and since 2008 have received over 20 million customer complaints. Policy intervention since has focused on structural changes, whilst cultural change has been left largely to industry to address. The report found that aggressive sales culture was particularly prevalent amongst demutualised building societies, whilst in contrast the majority of organisations offering the best service in banking were mutuals.
• Today again the Prudential Regulatory Authority has issued a consultationsetting out its plans for a new ‘Senior Insurance Managers Regime’, to ensure leaders of insurers behave with integrity, honesty and skill- or suffer the consequences directly. This is complemented by a consultation by the Financial Conduct Authority on changes to its Approved Persons Regime.
• Earlier this month AFM released an updated version of the Annotated Corporate Governance Code for Mutual Insurers, with clear messages about the importance of the ‘tone from the top’, and the continuing need for Boards to lead the right culture in their organisations.
So it seems that there is a healthy debate about how culture and diversity fit at present. That isn't to pretend that the culture in mutuals is right for all organisations, or even that culture is right in all mutuals, but as the Manifesto document emphasises, a diverse market for financial services is more likely to produce good outcomes for consumers.
If you have a view on the issue, let me know; our Twitter account is @ownedbyyou.