The need for radical transparency in an age of mistrust

As the news of the royal commission into the financial services sector slips from the front pages, it’s worth taking a breath to consider how the sector as a whole can best respond to the very real challenges the inquiry will bring in 2018.

The inquiry has been called amid a rising level of public mistrust in the financial services sector. Consumer trust in banks globally has fallen since the global financial crisis and Australia hasn’t been immune to this trend.

In such a climate of suspicion, our advice for any organisation is to pursue a policy of radical transparency. Because when a sector as a whole is under the spotlight, every brand—and every stakeholder group—is affected. Staff morale will be impacted by negative media and heightened customer scrutiny. Previously ‘happy enough’ customers will start to question their relationship with providers. Prospective customers will add new considerations to their provider selection process. Long-term commercial partnerships may be tested.

An organisation-wide communications strategy incorporating clear messaging and honest brand positioning is essential to protect and enhance the reputation of individual organisations and the sector as a whole.  Some important elements include:

Deliver a clear message

Banking is a complicated business, as is insurance, superannuation and the financial sector generally. Financial sector communicators must work hard to reduce opacity and bring their customers and the broader public into the circle of understanding.

Consumer trust is essential to the functioning of a robust system of lending, saving and investing. Customers need to feel confident that their banks are acting in their interests.

Communicate regularly

Regular communication both internally and externally is imperative. Organisations today need to understand how their different audiences communicate—and through what channels. In the age of the Internet, silence or absence can be perceived as a breach of trust. Speed and consistency is important—and this requires stringent planning.

Internal communication needs to be believable and backed up by tangible action to foster loyalty as well as demonstrate a culture where acting in the interests of the customer is paramount.

Be a force for good

On the upside, financial players will also have the opportunity to show the value they deliver to Australian society. It’s time to highlight the role the sector plays in empowering people to reach their financial goals and have the life they want, whether that’s buying a home or saving for their child’s education.

Taking an active role in educating consumers on personal finance and improving financial literacy for all Australians, young and old, also helps all members of the community feel they are participating in and benefiting from the system.

Be prepared

As the inquiry gets underway, even supremely confident organisations need to be prepared to be thrust into the spotlight. Crisis communication plans must be set in place so that responses can be delivered quickly and confidently when issues unexpectedly arise.  No matter how good your corporate governance, there’s always the possibility that a disgruntled client or former employee may lodge a complaint with the Commission, and the media may pick it up.

When things do go wrong, it’s important to use events as an opportunity to respond in a timely and authentic way to explain and address the issue.

The coming year will indeed be a period of upheaval just as the sector is grappling with challenges from rapid technological change, increased regulatory requirements and growing global economic uncertainty.

However, this is also an opportunity for the sector to begin rebuilding public trust through a policy of unflinching openness and clear communication.

ASFA does it again

It’s feels like a growing trend that the annual ASFA conference is timed with a seismic event.

Twelve months ago I sat in the ASFA conference as the surprise and shock of the Trump election spread through the auditorium. This year, it was the announcement of a Royal Commission, not just into banks, but the broader financial services sector – including superannuation.

Good timing or bad timing, it’s still not clear, but the show (or in this case the world’s biggest pension fund conference) must go on.

With increased analysis and scrutiny set to be a clear focus in 2018, it was unsurprising a clear theme to emerge at ASFA 2017 was a focus on trust and brand.

And according to branding expert Martin Lindstrom, organisations need to better understand the heartbeat of their consumers. According to Lindstrom, this is difficult because 85% of what we do as an individual is irrational. However, if brands can better infuse emotions into dealing with individuals then they’ll be much more successful in creating a connection and fostering an advocate.

Spaceship and other new players were cited in a number of discussions as an example of one brand doing an especially good job of building trust—by aligning user experience with their expectation. But as journalist Sophie Elsworth pointed out on a confronting panel of media commentators, the general punter does not care about super. It is too far into the future and too confusing, so people switch off.

Compounding that confusion is the ongoing regulatory uncertainty that continues to plague the sector. In her address to ASFA, the Minister for Revenue and Financial Services, Kelly O’Dwyer said despite the announcement of the Royal Commission the Government planned to keep pushing previously announced policy reforms.

So above and beyond the Royal Commission, in 2018 we could potentially see legislation around the compulsory introduction of a minimum one-third independent directors on the boards of all super funds; new oversight to ensure greater transparency of how super funds spend members’ money;  and the introduction of choice to the default fund system. With the Productivity Commission’s Competitiveness and Efficiency of the Superannuation Industry due to report mid-year and the Insurance Within Super Working Group developing a best practice code of conduct, and Government pushing a range of superannuation legislation through Parliament, 2018 promises to be another busy year (nee confusing year for members) for the superannuation and financial services sector.

What we’ll be talking about at ASFA 2018 in Adelaide is anyone’s guess.

Crisis Comms 3.0 – How not to ‘do an Uber’

Another day, another headline shouting about a cyber breach.  Except this time, it’s a business that has already made the headlines numerous times, and holds a vast amount of personal data from millions of people around the world.
It appears the ‘disruptor’ has become the ‘disrupted’.

Last month, Uber admitted to a massive data breach, having been targeted by cyber criminals in 2016. To add insult to injury, it then admitted to paying the hackers $100,000 to go away, and not tell anyone.

Even though here in Australia businesses are not legally required to report data breaches (until next year when the Privacy Amendment Bill comes into effect), in other parts of the world, businesses do have to report it.

By demanding that the hackers destroy the stolen data, Uber may have violated a Federal Trade Commission rule on breach disclosure that prohibits companies from destroying any forensic evidence in the course of their investigation.

But aside from what Uber has done illegally, there’s the ethical aspect. It traded transparency and honesty for a cover up that may damage its reputation for the foreseeable future.

So what can businesses learn from this?

1.    Take responsibility

We all know not to cover up the issue, it will only make it worse.  Yet time and time again there are businesses who still try and do so, or wait until it’s too late to do anything proactive about it.

The best course of action is to front it as early as possible, taking responsibility, reacting immediately, and responding to feedback.

Instead of arguing publicly, acknowledge people’s concerns and questions, and respond personally to the right conversations.

2.    Be human

There’s nothing worse than a CEO or spokesperson acting like a robot. Giving automated and clinical responses immediately suggests a lack of care and consideration, putting the brand in a bad light.

It’s important to share how policies will be put in place so the issue or mishap does not happen again. Act fast before people lose faith in your brand.

3.    Communicate

Getting ahead of the situation will pay dividends with public favour.  Communicate all relevant details to key stakeholders in a timely manner, and if you cannot comment, make sure you have a holding statement ready.

If you’re still assessing a situation, simply say that. Recognise that transparency is key about how you’re solving the situation.

4.    Establish an appropriate culture that the brand is recognised for

Treat people how you want to be treated.  If a business has a bad internal culture, its employees will mirror that externally—negativity is toxic and it breeds.  Employees are not responsible for the toxic brand culture.  Create a happy and positive workplace and you’ll find that’s reflected across the brand, and externally too.

5.    Be ready

No one wants to be at the centre of a scandal, but scrambling around in the heat of a crisis takes things from bad to worse.  Anticipate potential crisis scenarios and establish internal protocols for handling them.

Having a plan means you’ll know who needs to be notified, how the sign off process will work internally, and key spokespeople will be identified who are able to speak publicly on the businesses behalf.

How Australia’s finance sector could do more to boost financial literacy

It’s all very well to do something in theory, but often it’s not until we practise something in the real world that we feel truly comfortable with it.

Imagine if as well as teaching our kids about the basics of money, we also gave primary school classes real money, say $20,000, to inve invest in stocks and bonds.

That’s what U.S. investment manager Ariel Investments is doing on a small scale at a public school in its home town of Chicago, and we think Australia can learn a thing or two from their approach.

Financial literacy is back on the policy agenda here with the Australian Securities and Investments Commission (ASIC) reviewing its national strategy to tackle the issue, making it a prime time to consider new approaches.

Despite ASIC’s attempts to boost financial literacy in recent years, largely through its MoneySmart website, ASIC’s own research shows 42% of Australians still don’t feel confident managing their money day-to-day and 36% find dealing with money stressful and overwhelming.

Without the confidence and ability to manage their finances, many people are facing insecure futures. According to recent research funded by NAB, 70% of Australian adults are facing some level of financial stress or vulnerability. Furthermore 2.6 million people have no savings at all, and the situation is deteriorating.

The problems starts in childhood. Around a fifth of 15-year-olds in Australia don’t have even the most basic level of financial literacy, according to the OECD, with the proportion of financially literate teenagers slipping in recent years. Those with low socio-economic backgrounds on average perform much lower in financial literacy assessments than children from more well-off families, highlighting the need for better programs aimed at disadvantaged students.

Start early, make it real

A key focus of Ariel’s approach is to start teaching financial literacy to kids at an early age, and to use real-time and real-world experiences to make sure school is a place where financial literacy is practised and not just preached.

For 20 years, the firm has supported a financial literacy program at the Ariel Community Academy (ACA), a public elementary (primary) school on Chicago’s South Side, where 98% of students are African-American and more than three quarters qualify for subsidised lunches, reflecting their families’ low incomes.

A core driver of the program is to use financial literacy as a tool to fight inequality. A study conducted by George Washington University (Washington DC) revealed that “those with the least financial knowledge are also the most vulnerable groups in economic terms. As a result, the lack of financial literacy exacerbates economic inequality.”

ACA students learn not just about personal finance, which is typically the extent of most financial literacy programs, but also basic to advanced investment concepts—kids start learning about stocks from first grade and begin trading stocks in sixth grade.

Ariel sponsors a three-pronged financial literacy program for the school that includes:

    1. A financial literacy curriculum developed in consultation with educators and leading economists that comprises four key strands: Economics, Personal Finance, Entrepreneurship and Investing.


    1. The Ariel-Nuveen investment program. Through a partnership with Nuveen, the investment arm of TIAA, Ariel awards each class a US$20,000 grant to invest in the U.S. stock market over the coming eight years until they graduate. In the early years, the money is invested and managed professionally on behalf of the students. However, as the students advance through the school’s unique investment curriculum, they become actively involved in making the investment decisions, with a Junior Board of Directors (made up of sixth, seventh and eighth grade students) assuming ultimate responsibility for deciding how the $20,000 is invested.


  1. Engagement between Ariel as an organisation and students to drive home the importance of what the kids are learning. Students visit the Ariel office to observe board meetings and stock presentations, and high-profile guest speakers visit investment classes, providing students the opportunity to dialogue with leaders of industry, finance and philanthropy.

Ariel and Honner recently made a joint submission to ASIC calling on the regulator to create a platform whereby local banks, investment managers and other financial companies can support financial literacy programs in Australian primary schools, similar to the way Ariel supports ACA.

At a minimum, we recommend that ASIC work with educators and the private sector to develop a financial literacy program to target the 5% of government primary schools that are the most disadvantaged in socio-economic terms.

We don’t believe it’s sufficient to wait until university, or even until high school, to begin teaching young people about investing.

If a national framework was established to target younger children in need, we believe many generous people across Australia’s substantial financial sector would be willing to give time and money to support the program. And we know, from Ariel’s inspiring pilot in Chicago, that change is possible.

We encourage you to read our submission and welcome your feedback.