Two months have passed since the final Financial Services Royal Commission report was published, and industrywide problems in consumer lending, superannuation, and insurance continue to plague Australia’s financial services sector. The royal commission exposed major issues in home lending, with numerous cases of broker misconduct brought to the fore.
What’s more disappointing than the misconduct is the inadequate response from the industry.
Right now, financial services leaders have two options: Continue doing business as usual and lobby to avoid regulation, or make a concerted effort to change and restore customer trust. Forrester highly encourages leaders to do the latter. Unfortunately, most leaders aren’t.
Australia’s financial services leaders should not wait for new regulations or legislation to get passed before taking any action. Leaders should:
- Overhaul corporate culture to put customers first. Senior executives at financial firms need to change their culture to put customers first and show Australians that they mean it. In an attempt to do just that, acting CEO Phil Chronican axed NAB’s controversial “introducer” program that paid a finder’s fee to people — not financial professionals — who refer customers to the bank if they take out a loan.
- Sell or restructure brokerage subsidiaries to resolve the conflict of interest. Currently, most large brokerages are owned by Australia’s big banks, setting up an inherent conflict of interest. Banks should sell or restructure their mortgage-broking businesses in order to appear fair and honest and rebuild trust with customers by showing them that the bank has their best interests at heart.
- Prepare for the future with compelling direct-to-consumer offerings. Lenders must be ready for a future when trail commissions are banned and broker commissions are capped. Lenders must create strategies to win customers before that happens. Leading firms will elevate direct-to-consumer digital capabilities; they’ll focus not only on transparency and simplicity but also on building relationships and supporting customers, especially first-time home buyers, with human assistance — which is why customers go to brokers in the first place.