Rebuilding Trust In Financial Services


Moving from rhetoric to solutions

The path to rebuilding trust with Australians starts now for leaders in the Australian financial services industry. The shift from rhetoric to solutions needs to be swift.

In his 2015 book looking back at the global financial crisis title Other People’s Money, Financial Times journalist John Kay quoted American writer Upton Sinclair, to the effect that:

“It is difficult to get a man to understand something, when his salary depends on his not understanding it.”

In the wake of the ongoing Royal CommissionProductivity Commission Report into Competition and Efficiency, and the pending Protecting Your Super reforms – key decision makers in financial institutions will need to revisit their understanding of what best interests of a member or client really means: even if their salary has been dependant on not understanding it in the past.

The term best interests is thrown around so much in the financial services sector, that we’re at risk on forgetting what it actually means. Best interests in a fiduciary relationship such as a trustee or advisor has a specific meaning, a meaning found in loyalty and prudence.

Photo by Aaron Ang on Unsplash

Photo by Aaron Ang on Unsplash


Loyalty is not a complex concept, it simply requires that where there are diverging interests, or conflicts of interest… that the interests of the member or client must (and always must) be prioritised. This is more than paying lip service that customers come first, it’s conduct, practice and structure which actively prioritises their interests.

Commissioner Hayne demonstrated that point in the early hearings of the Royal Commission, illustrating the binary decision faced by financial institutions between prioritising consumer outcomes over commercial outcomes or profits. The correct answer to the question in a fiduciary context isn’t a balancing act, but always the pole representing consumer, member, or client outcomes.


Prudence is an equally simple concept. It requires that those responsible for managing other people’s money are capable and competent to manage their money to the standard of care that the community has a right to expect.

This means having appropriate systems and structures in place to ensure that risks are quickly identified, readily assessed, and diligently managed. At the very least, it also means that Other People’s Money is managed in accordance with the product terms and conditions, and laws that fiduciaries are required to abide by. The fundamental duty of a trustee is to administer the trust in accordance with the terms of the trust. This shouldn't be merely an aspiration, but the foundation upon which prudence and trust is built.

The prudent management of Other People’s Money requires that superannuation trustees strike the balance between long-term performance and costs, ensures the commercial arrangements in supply chains are the best available, that opportunities to promote scale efficiency through consolidation are seriously considered, and that claims and complaints are dealt with fairly and efficiently.

Powers for proper purpose

The responsibilities of superannuation trustees don't spot at the loyalty and prudence required by the best interests duty. Powers also need to be exercised for the purpose for which they are given. This can be found both in the terms of trust instruments, but also in statute in the form of the sole purpose test.

Put simply the purpose of each superannuation fund always relates in some way to the provision of retirement savings and income. Decisions about the use and management of the assets held on trust must be exercised with this overarching purpose paramount. Vigilance may sometime be required to ensure that decisions, and assets are managed towards this purpose.

It is with this commitment to loyalty, prudence, and retirement savings and income that leaders in the financial services industry need to orient if trust is to be restored.

The theatre of the Royal Commission hearings may be the window through which the public can view the shortcomings of the financial services sector, yet the time is one of change. As John Kay aptly noted in Other People’s Money:

“A policy of ‘naming and shaming’ is ineffective if everyone has been named and shamed.”

The law of trust is old, as are the problems its seeks to regulate and remedy. Yet the solutions to the trust deficit may be are new.

James Shipton, Chair of the Australian Securities and Investments Commission (ASIC) recently zeroed in on this, pointing trustees to the start line for a better way:

“There needs to be more investment in management systems and processes to capture, diagnose and remediate conduct issues earlier, quicker and more efficiently. This includes the adoptions of emerging regtech solutions.”

The rebuilding of trust in financial services will require strong leadership in adopting new laws, revisiting commercial models, and investing in emerging technologies which institutionalise accuracy, transparency, and maximise the probability of the best outcomes for clients and members.

As the attention of the Royal Commission into Banking, and Financial Services turns its attention to superannuation, those of us who consider ourselves leaders in the industry need to check that we are oriented towards the best interests of the members of the system and are brave enough to find better ways to solve old problems.



Jonathan Steffanoni - Principal Consultant, Legal and Risk


QMV provides trusted advisory, consulting and technology to Australia’s leading superannuation, insurance, banking and wealth management organisations.

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