ASIC chair addresses ‘trust deficit’ in financial sector

Financial services sector squarely in his sights.

ASIC chief addresses ‘trust deficit’

The ‘trust deficit’ in the financial services sector must be restored, according to the Chair of the Australian Securities and Investments Commission.

In his keynote speech at his first annual forum in Sydney on Monday – and as the financial services royal commission continued in Melbourne – James Shipton focused on trust and how it underpinned our entire financial infrastructure.

There must be trust in the infrastructure and trust in the people, he said.

“In my observation, there is generally – at present – high levels of trust in the infrastructure that supports our (financial) system and enables the underlying financial ‘plumbing’ to work,” he told the forum.

“Studies in recent years ...  suggest that while we have high levels of trust in this underlying financial plumbing, financial services is one of the least trusted industries.

“We need confidence that the people in banking, insurance and funds management will keep their promises, act in our interests and live up to community expectations. We also need to trust that directors, auditors, mortgage brokers, and financial planners will do their jobs with competence and honesty.”

If there is decay in one, it will degrade the other, which would be “catastrophic”, he said.

“And since trust in the financial infrastructure appears to be sufficient, the sad conclusion must be that Australians don’t look to people in finance with enough trust.”

Competence, care and ethics were the foundation stones to trustworthiness, he said, and the keys to reversing the trust deficit.

He reminded everyone in the financial sector that they were dealing with other people’s money and that financial risks could, and often were, catastrophic to real people.

Finance exists to serve everyday Australians, he said, and must always be anchored to the following core functions:

  • capital allocation: matching those who need capital with those with excess capital
  • inter and intra-generational transfers of wealth
  • hedging and insuring against risks
  • the payment system.

“Having established that finance, at its heart, exists to serve people via its core functions, it is vital that it can be relied on by Australians. This is where trust comes back into play – people must be able to trust finance.”

Mr Shipton said greater levels of professionalism would rebuild trust and that ASIC would play its part in the process.

“For example, ASIC has long advocated for enhancements to the education requirements and ethical standards for financial advisers. We strongly support the Government's reforms in this area, which have culminated in the establishment of the Financial Advisers Standards and Ethics Authority (FASEA).”

Do you have trust in the financial services sector? Have you had reason not to have trust?

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    COMMENTS

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    20th Mar 2018
    11:17am
    Trust level towards this sector = zero. All they're interested in is milking their (gullible) customers.
    floss
    20th Mar 2018
    11:56am
    Trust has to be earned and our Governments idea that greed is good has flowed to all sectors of life.The big losers in this situation are the aged and weak.Once upon a time people looked to the Labor party for some form of protection ,the Labor party are now a shell of the old party and they have lost their way completely as to why they were formed in the first place.
    KSS
    20th Mar 2018
    12:28pm
    I wouldn't borrow money from them either floss!

    20th Mar 2018
    12:51pm
    Have no reason not to trust the sector .
    Like any business transaction , one should always do their due diligence
    Can’t legislate against stupid
    floss
    20th Mar 2018
    3:36pm
    You have to trust some one that is supposed to know more than you, we can't all be as smart as you Raphael.
    Anonymous
    20th Mar 2018
    4:29pm
    Thats not nice and its a cop out
    Many people knowingly get into deals over their heads because they are greedy or just bad with money
    AND then cry NO FAIR when they find themselves unable to fullfil their obligations or lose money .

    Always easier to blame the financial institutions in the hope of getting more money out of them or walking away from their liabilities

    Simply put - these people are con artists, not the institutions
    Hairy
    20th Mar 2018
    6:33pm
    Hahaha trust them like I trust malturd and his morons and the rest of the rorters and theives in opposition.im a pensioner scammers you can see them coming but goverment ????
    GeorgeM
    20th Mar 2018
    8:24pm
    How can you possibly trust someone / a sector whose motivation is to maximise a profit out of you? The idea sounds ridiculous - as long as CEOs (and other Senior Management) get large bonuses and brokers get large commissions - based on how badly they rip you off!

    Remove greed from the mix - by limiting bonuses and commissions severely, and with KPIs to include real Customer Satisfaction & Benefits achieved measured anonymously, and then maybe things could improve.
    wombat
    22nd Mar 2018
    5:46pm
    It's a shame the financial laws went too far to protect. The family accountant you have been seeing for years & who knows your personal circumstances can't even assist by reviewing/comparing advice from financial planners. Apparently this is seen as giving financial advise by influencing your decision. They don't want to be financial advisers, but years ago they could help you wade through the mumbo jumbo in the financial advice plans to help you understand. Unless licenced they can't do that anymore. It would be helpful if you could discuss the pros and cons of the financial advice with a neutral party.