Popular consensus suggests that trust in the financial sector is absolutely essential for society. Yet we seem to have
reached a low tide mark, when the conduct of organisations is under scrutiny. From the LIBOR scandal, rogue trading and
tax transparency, the attention being paid to organisations’ integrity and that of individuals acting in their name, has
arguably never been greater. But while such episodes undermine common trust, they vary widely in nature. Some reflect
unlawful behaviour while others are perfectly legal; some mirror organisations’ inherent culture and others spring from rogue
behaviours. Yet they are all seen as cultural failings.
Rebuilding a reputation for trustworthiness, doing things in the best interests of clients, delivering good client outcomes,
being open with regulators and working with integrity are all much easier said than done. Missives from Head Office will not
suffice; organisations must motivate their people to look at how they behave and adopt the highest codes of ethical
behaviour. An organisation’s future is bleak unless its behaviours match the messages about business integrity emanating
from the board room.
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Good things take time
And herein lies the problem. Behavioural change across an organisation is a challenge – requiring time, consistent
messaging and exemplary example from business leaders. It is about setting the right tone at the top, converting this into
easily understood practices and supporting and encouraging the right behaviours through employee development,
performance management and reward. Induction programmes and training must be used to stress the importance of
integrity. Incentives need to reinforce, and not undermine, desired behaviour. Rewarding CRMs simply for growing AuM will
not encourage them to tackle their suspicions that a longstanding and wealthy client may not be tax compliant or may not
meet AML rules.
Addressing these issues requires understanding how cultural and behavioural norms contribute to an organisation’s risk
resilience, as well as the relationship between business ethics, integrity and risk. Business ethics can be defined as the
application of a set of moral values that an organisation’s stakeholders accept as the principles that should guide
behaviours. Integrity is the adherence to moral and ethical principles. These definitions provide a useful basis for moving
forward.
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By GlobalDataThe challenge is to create reliable guiding landmarks, from which wealth managers can continually re-calibrate their ethical
compasses. Much revolves around their ability to build adaptive capacity in business ethics and integrity. For the calibration
of an organisational ethical compass to be effective, the board must initiate the exercise. The compass must include a
specific business ethics and integrity risk appetite, which should become an integral part of the behavioural norms that
translate culture and values into actions.
Tone from the top
Boards can set the right tone for decisions, by making sure that their people have the right high-quality information, use the
right processes to generate insights and see the stories behind the numbers. This leads to a series of cascaded
conversations between leaders and their front-line reports about what appetite there is for risk in their local accountabilities
and targets.
Simply put, the compass needs to be translated into day-to-day decisions, ethical dilemmas and trade-offs. Private banks
need to be courageous and proactive if they are to rebuild external public perception and engender higher levels of client
confidence and trust. Regulators will push them on issues like tax transparency, but they should take the lead themselves.
The most courageous organisations are already doing so, recognising that it is a tough road, that some clients will be lost,
but understanding that an organisation that has reviewed its client book, products and incentive programmes critically will
be first to regain public trust and, with it, new business.
As a call to action in the private banking and wealth management industry, ‘we do it this way because we always have’
must be replaced by ‘we do it this way because it is the right thing to do — and we still make money’.
Jeremy Jensen is the EMEA leader of the global private banking and wealth management at PwC
