What your firm can learn from the Banking Royal Commission
Lessons from an industry under scrutiny
Like many Australians I have been utterly gripped by the Banking Royal Commission.* And, like most of people who have been following proceedings closely, I ‘ve been in equal parts fascinated, bemused and appalled.
But my current obsession got me thinking about the parallels between what’s happening in our financial institutions and what I see day-to-day in professional services firms. And while some things are thankfully very different, there are also some lessons we could learn.
Here’s what I think they are.
1. We need to measure the right things
When it came to their financial advisers, many financial services firms were measuring and rewarding the wrong behaviour. Charging fees mattered. How advisers obtained them - well, in some cases anyway, that didn’t matter so much.
Because of this culture, an ANZ audit of its own advisers found that five percent of financial advice given wasn’t in the clients’ interests. However, when asked about whether the Bank had considered ranking employees based on the quality of their advice rather than on the amount they billed, the Chief Risk Officer of ANZ Bank's digital and wealth arms was put on the stand, said she hadn’t.
“I could think of measures like net promoter score, which is a measure of customer satisfaction … there may well be others, I'm sorry, I just haven't turned my mind to that question before," she said.
For the record, I don’t think the Net Promoter score - which measures the loyalty of a firm’s client relationships - was necessarily the answer here. In fact, sometimes I think we over-measure things when we’d be much better off just letting people get on with it. I’m not alone either.
But what I do think is obvious is that rewarding only the top billers is short-sighted. A good firm consists of a range of skills and people, all of which contribute to long-term success. As professionals, we should all be prepared to sacrifice some short-term dollars for long-term quality.
And, with that in mind, you can see my list of the things that we actually should measure at the bottom of the article. You can also read my thoughts on how to effectively reward staff for bringing in new work here.
2. Your own guys aren’t always the best
The essence of being professional means acting in your clients interests while also honouring your duties to the court, the law and your professional bodies. What’s clear from the Royal Commission is that this wasn’t always happening with financial advisers.
Instead of putting clients into the best products, they were often putting them into the ones that paid them the highest commission and/or only those owned by the bank whose umbrella they worked under.
I know I’ve railed against cross-selling before. But I thought this was a good time to mention it again.
There’s nothing wrong with introducing clients to another part of your firm when you know that it’s in their interest. Bu, I do have a problem with professionals who refer a client to another practice area when they know that it’s not up to scratch but they’re ‘doing a solid’ for a friend or they get a share of the fees.
It’s unprofessional, high risk and it makes bad long-term business sense. Acting in your clients’ interests means always connecting them with the best people for the job.
3. The healthiest business relationships are those between equals
One reason that some financial advisers were getting away with so much was because there was a massive power imbalance in the relationship. The adviser held all the knowledge and information. The client had none. (Although, when an adviser took on a Fair Work Commissioner, it didn’t end so well for him.)
In most professions - and especially in law and accounting - I think the reverse is now often true. The client holds all the power and the poor professional must jump through hoops just to please them.
How often are firms - even, or perhaps, especially, the largest and most prestigious ones - made to deliver advice in ridiculous timeframes, and expected to work across weekends and through the nights?
One very, very large American company even asks its lawyers and advisers to fill out a form telling them whether they have a health issue, or identify as LGBTI. Seriously, how demeaning.
A healthy professional relationship isn’t one of master and servant. It’s one where the professional acts as guide and adviser - telling the client the truth, managing expectations and challenging them when they need to. In other words, it’s about being respected and not just saying yes.
So set parameters. Break up with clients who don’t adhere to them. Leave them to suck your competitors’ time and energy, not yours.
In the long-term it’ll lead to a healthier and more sustainable practice. Oh, and you’ll be much happier too.
4. Some things matter more than money
While we’re on the topic, it’s sometimes nice to remember that money won’t solve all your problems. Sure, it’s a big part of why we’re all in business and we could all do with a bit more - or even a lot more - of it. But money should never come at all costs, and certainly never at the cost of our moral compasses.
So go back and think about why you do what you do. Is it because you enjoy the work? (That should always be a big part of it.) Is it because you enjoy the camaraderie, the challenge, or the joy that comes from knowing you help people or do a good job?
Make getting more of that your goal and work back from there. Then you’ll often find your BD not only falls into place nicely, you become happier and, just as importantly, you never become tempted to do what some of the banks and financial advisers have been doing.
If you’d like to know more about building a profitable but sustainable practice - and not one based on short-term gain - get in touch.
Sue-Ella’s list of things that actually should be measured
1. The quality and reliability of referral sources.
2. Feedback from clients. This should always go beyond the Net Promoter score because I’ve seen firms that game these, big time. Instead, look for the qualitative responses that support any ratings.
3. The number of clients who refer others to you. This is a pretty good indication that you’re hitting the mark with your existing clients.
4. The quality of your non-billable time with clients, eg whether you’re connecting people for their advantage not yours, as well as any training, mentoring and coaching you’re doing and how much time you’re spending reviewing work of juniors and helping them make a real contribution.
5. The profile of clients who are attracted to you. Are they loyal? Do they respect your advice? Are they ethical? What’s their business culture like?
6. The percentage of clients you actually enjoy working with. As a guide, if you have more than a quarter of clients you don’t like working with, it’s time to tear down and rebuild or even rethink your career altogether.
* For my overseas readers, the Banking Royal Commission is a formal public inquiry into misconduct in the banking, superannuation and financial services industries. It’s big news here because, as the ABC puts it: “Australia’s banks have been plagued with one scandal after another over the past decade”, and yet, they’ve remained very, very, very profitable.