The path to ethical selling: how the banks can avoid a royal commission

Everybody lives by selling something, even the banks and financial services businesses. However, it seems too many people in some divisions of some of the banking, financial planning and insurance institutions have confused ethical selling with unethical selling practices. Not all banks and financial institutions, mind you, but enough of the big ones to erode trust so badly that people are baying for a royal commission.

When I first started introducing the discipline of selling to the Australian banking sector back in early 1990’s I was met with a ‘we don’t sell’ mentality even though I have always promoted ethical selling practices. Selling wasn’t on their radar, it was seen as unprofessional or unethical which is kind of ironic given the current crisis in confidence the banks are having with their customers and the general public.

The insurance industry, however, has been okay with selling for many, many years, albeit with a rather dubious reputation attached. We’ve all heard of the term ‘insurance salesman’ which is imbued with more negative connotations than positive ones. This is not fair either. There are honourable sales people in the insurance industry as well.

The reason it has all fallen down and arrived at this juncture is mainly due to performance measures and reward systems that do not factor in the client at all. I have been writing regularly about the breaches of ethics, fiduciary duty and trust in the banking and finance sectors since 2007. This included a focus on the competing motivations sales people face when they are paid very low base salaries with big commissions and then put under pressure to perform a numbers game at the expense of genuinely helping clients get the right products and services they need and not the products and services the salesperson will make the most commission on.

Instead of helping customers make informed buying decisions and creating a fair exchange of value, these banking and finance people have abandoned their principles for reasons of personal gain and expedience, only seeing customers to be taken advantage of and exploited. This results in defrauded customers, illegal and criminal acts, loss of reputation, and incredible breaches in trust on every level.

This is not to imply every bank and every person in the banking and finance sector in unethical and up to no good, many are not; however, there have been enough people tied to prominent brands who have broken the bonds of trust, making our relationships between banks communities very frayed and tenuous. Gone is the image and reputation of the bank manager as a trusted member of the community.

Sadly, there is no shortage of stories to write about when it comes to highlighting the many unethical sales cases in the banking and finance sector which is why so many people are calling for a royal commission.

A crisis of leadership and culture

The stories always point to the individuals who have committed these fraudulent acts, but much of this happens because is condoned by the organisational culture and senior leaders allowing these toxic cultures of greed and corruption making it systemic. Senior executives and their board must accept full responsibility that these heinous acts have happened on their watch. For too long the relevant bank boards and their senior leadership have brushed aside and avoided their fiduciary and moral duties.

But things may be changing. In November, NAB reports it was sacking 20 bankers over home loan rule breaches.  

On the same day, Catherine Livingstone, chairperson of the Commonwealth Bank, apologised over flaws in the bank’s systems for stopping money laundering, as shareholders backed its overhaul of executive pay and crackdown on short-term bonuses.

Apologies are important but not nearly enough.

How to avoid a royal commission

Many of the banks are focusing their efforts and investing heavily in training their staff to improve the conduct, regulatory and compliance aspects of their businesses.

These are important but only go part of the way to address this issue.

To stave off a royal commission and improve their reputations and standing in the community, the banks must change from the inside out, genuinely going about creating ethical client-centred sales cultures that are built on a fair exchange of value for buyer and sellers. They need to grow teams made of skilled people who show genuine care for helping clients achieve their goals and deliver value, and are not distracted by self-serving commission and incentives schemes or a purely numbers approach to performance.

A key area to address needs to be the way these businesses reward their people. Yes, selling is a numbers game but good selling is a quality numbers game, so introducing measures that focus on delivering quality client portfolios, client retention and so on will go a long way to building back confidence and trust in the system.

This will require wholesales change from the top down over the long term. Those senior executives who lead from the front and expect standards of excellence in treating people (clients and staff) fairly and with care will begin to create the banking experience we are all looking for and desire.

Remember everybody lives by selling something.