Prior to some recent high-profile incidents hitting the press (most importantly Woodford but also smaller companies like London and Capital), the asset management and private banking and wealth management industry had remained largely unscathed by some of the nastier reputational crises affecting other parts of the financial services world.
Whilst a fair comment would be that for many members of society, the post-crash brush tarnishes us all with sentiments of generalised distrust, broadly speaking, private banks have been rarely named and shamed as the pinnacle of financial services nastiness (read: Wonga et al).
Given this, some do not accept that there is – or could be – a looming problem with the reputation of the private banking and wealth industry. However, regardless of personal opinions, society, regulation and politics are a constantly evolving entity – and due to the ever-increasing dissemination of information online, any company in the public eye can become the subject of intense scrutiny overnight.
With this in mind, there is no reason rest on one’s laurels where reputation is concerned, as Members of the Financial Services Forum’s Private Banking and Wealth Management Special Interest Group discussed at our ‘What should the investment industry do about its reputational crisis’ event on the 3 October.
In fact, as Tony Langham, Co-Founder and CEO of Lansons, commented in his opening presentation, regardless of your opinion on the current state of the industry’s reputation, dangerous currents are at play. Tony began by outlining what he believes are 4 key ‘drifts’ in the industry, that Members would do well to pre-empt:
- Regulatory Drift
The regulator has often implied that it believes the industry makes too much money. Whilst this is by no means a threat, heed should be taken, particularly considering recent headline news stories concerning the renumeration of advisors and wealth managers.
Outward displays of opulence in an age where many face retirements on meagre pension pots is completely inappropriate. The industry needs to demonstrate value, the existence of competition and show that it puts the consumer first.
- Labour Drift
Labour are a threat, not because they are likely to form the next Government (although they could) but because they help set the agenda. They have stated their intention to limit chief executive pay, a raise in corporation tax from 19% back to 26% and review inheritance tax cuts. Policies will be adapted, and we can be confident a Labour government would look at the wealthier members of society first when assessing how to increase revenue.
- Brexit Drift
With some private banks already in the process or planning to relocate their head offices overseas, others are facing a critical decision on the future of their offices in the face of ongoing Brexit uncertainty.
- Societal Drift
Tony highlighted the recent adjournment of BP as a sponsor of The Royal Shakespeare Company, due to increasing criticism by The RSC supporters over implications of partnering with a business that supplies fossil fuels. Customers and consumers are looking to and for companies who can align themselves with their values and behaviours, as well as demonstrating their purpose and value to society.
Tony added to the above points, that as an industry, financial services are typically bad at articulating what it is they ‘do’ for the wider world. This lack of clarity and in parts, self-confidence, has inevitable implications to reputation. Whilst to some degree this uncertainty may be in part due to fear of using language that may be construed as a promise of financial return, emphatically, no asset manager or private bank invests money in the hope of making their customers lives worse.
In fact, in addition to seeking return on investments, private banks and wealth managers use this money to invest in projects, infrastructure and businesses that do inherent societal good, and would perhaps not withstand without the support of businesses like ours.
Following an hour of discussion from the attendees, the six key takeaways from the resulting discussion around the roundtable were:
- Will the industry be able to adapt and survive in the face of increased societal and regulatory scrutiny, technology and pressure for lower margins?
There will be winners and losers. The winners will be those who can be honest and fair both with themselves and their clients regarding fees, low-performing funds and their purpose as a business.
Investment in the purpose is key, and whilst lower margins may be unavoidable in an age of tech platforms, there will be a space for wealth managers and private banks who can remain relevant to new audiences and generations by having a clear proposition and purpose.
The group felt that businesses could not go far wrong by continuously re-centring themselves and their colleagues to this purpose in all that they do.
- Transparency and honesty are essential
A no-brainer for all Forum Members, but always worth reiterating. Have nothing to hide and you will have little to fear from a reputational perspective.
- What are the solid things that businesses can do for society?
As the saying goes, before you try and change the world, start with yourself. We know that the gender pay gap still exists. We also know that financial services businesses could take a harder look at how they can be a better and more attractive employer to minority ethnic and gender diverse groups.
- Educating the consumer and overcoming the language barrier
The everyday consumer does not understand financial products. Words such as ‘risk’ and unnecessary – and frankly alienating acronyms and language prevent them from accessing products and services that help them to get the best out of their pension pot. What can the industry do to share their expertise for educational purposes?
- Reputation is a downward stream
Finally, the purpose and behaviour of the company must be defined and displayed at the very top. In fact, as one attendee commented, it is as parred back as the actions and ideology of the CEO themselves. If senior management cannot themselves be the employee they want to see working for their company, any ‘company values’ statement is rendered meaningless.
As ever, it was fantastic to hear from a varied group of FSF Members, all with different perspectives and experiences. Thank you again to our hosts Lansons and to Tony Langham for facilitating an interactive and enlightening discussion.