FOFA: An ethical debate
Pauline Vamos, ASFA Chief Executive Officer, acknowledges the responsibility of banking and finance professionals to make ethical decisions, particularly considering the asymmetry of information, knowledge and power in the practitioner/client relationship. She urges the industry to engage with this notion on a personal and conversational level, and start from the ground-up with the BFO.
I’ve been thinking about what we need to do as individuals to address the issues behind the business of ethics, and when it comes to changing the business of ethics, I believe that the core of the problem lies in the conversation. We must look to focus on the question of what is the right thing to do, rather than merely what is legal if we propose to change the way the financial services industry, is perceived.
In the context of my role as an industry advocate, this focus on doing the right thing is highly relevant, as the assumption is that advocacy is driven by vested interests and rent seeking.
In the financial services industry there are many different players and voices with varying views. Take the FOFA debate for instance – there is currently a significant debate regarding draft legislation in relation to FOFA. Concerns have been raised about possible consumer detriment if the current best interest duty is changed and any form of conflicted remuneration is attached to general advice. These concerns have been raised by many, including consumer groups.
I think the industry needs to reflect on this. The assumption is that if there is a loophole in regulation the industry will take it, if there is a possibility of bad behaviour it will likely occur, and that in the end it is the consumer who will be the loser because of the asymmetry of information, knowledge and power.
Maybe it is time for us to change the conversation on any aspects of financial services regulation – maybe it’s time we start the conversation with questions like, what is the right outcome for our consumers? What is the required ethical behaviour? And how can we hold each other accountable? We need to get back to the time when regulation was framed to catch the bad guys. Now the tendency is to frame regulation that provides direction on how everybody should behave, which means it is detailed and rules based, rather than principles based.
As it stands, this is not sustainable as the cost of detailed compliance will escalate and this is not the way to move towards greater self-regulation and this is not the way to build trust with the community. But we need to have these conversations in a non-threatening and non-emotional environment.
Initiatives like the BFO, that have established themselves as groups built on trust are here to help in these situations. The BFO was formed with strong support from key influencers in the industry as a commitment for individuals in the banking and finance industry to adopt as personal principles throughout their work.
It’s an initiative that I hope will resonate with those working in the banking and finance industry and one that has been created with the only vested interest being the greater good of the industry.
Pauline Vamos - ASFA Chief Executive Officer