“Why it is essential to not just tick the compliance box but actually nurture a culture of compliance.”
Prepared by Catherine Evans
As the fall-out from the Royal Commission continues we have seen lies to regulators, charging clients for services not provided (even to clients who are deceased) and what appears to be deliberate attempts to put financial performance above all else, including most importantly, clients’ best interests.
Without a “compliance culture”, it is virtually impossible to prevent the occurrence of these events. The most rigorous legislation will not and cannot cover every situation and there will always inevitably be scenarios that fall through the cracks. However, what constitutes a “compliance culture” is hard to define, let alone legislate for.
From our experience in this industry, we know that culture is driven from the top. The board (or owner(s) in smaller firms) sets the compliance culture and the unwritten rules and codes of conduct follow as a result. People within an organisation know very quickly what behaviour is acceptable. As a legal adviser to financial services businesses, it is very clear from the outset whether the business appetite is to “do the right thing” or to sail as close to the wind as possible. This sets the tone very clearly right through an organisation and impacts on product design, advice, marketing and remuneration structures.
As much as we may not like to admit it, we know at the end of the day money dictates behaviour. Until remuneration structures change to align financial performance of executives with compliance outcomes, nothing is likely to change. What gets measured gets done. And I’m not talking about an add on “compliance” KPI that everyone knows does not really matter. It has to be a fundamental part of the remuneration equation.
And what of the legal advisers to this industry? There are always ways to find loop holes in the black letter of the law. As a legal adviser you can generally use your expertise for good or for evil. As a law firm we choose to work with businesses who want to uphold the spirit of the law not just the technical requirements. We think about what the law is trying to achieve and the outcome desired rather than how we can get around it. I’m a firm believer that long term and lasting financial performance aligns perfectly with supporting a culture of compliance in the businesses we work with. This is putting my client’s best interest first. At the end of the day, good businesses know that these laws are there to protect their customers and clients and they care about them! A good reputation is invaluable and it can be irreparably damaged in the blink of an eye.
It will be devastating if the businesses out there who are doing the right thing (and yes, there are many of them) are tarnished with the brush of those organisations who have pursued money and greed at the expense of all else. We know of and work with many businesses who, despite having a legal right to take a certain course of action (such as accepting commissions or rebates or charging excessive fees), decide to put the client’s interests first rather than taking advantage of their legal rights. These businesses will hopefully be the strong players of the future where clients’ interests are valued, respected and upheld.