A nation’s culture resides in the hearts and souls of its people, said Mahatma Gandhi in an observation that also hints at the reason why governments and regulatory bodies can’t achieve cultural change by legislation alone. Equally, changes to the accepted way of doing things require time and acceptance by electorates and industries alike.
It is a point picked up by the latest CoreData research Fixing the Culture of Advice in Australia which works from the premise that the Future of Financial Advice reforms should be viewed as an opportunity for the Australian advice industry to fundamentally reshape its culture and change consumer perceptions.
In Breaking the Code Of Change, Michael Beer and Nitin Nohria said: “Organisational change involves confronting the persistent pattern of behaviour that is blocking the organisation from higher performance, diagnosing its consequences, and identifying the underlying assumptions and values that have created it.”
Writing on the wall
In financial planning, this means confronting the sales culture that has seen clients charged trail commissions, in many cases without any ongoing service element.
It also means addressing the lack of trust among the general public in financial advice and identifying “that the assumptions and values that created this culture are a belief that consumers are not willing to pay a fee for advice”.
However, what if change polarises an industry, with some either unwilling or unable to adapt?
“In emphasising tradition and consensus, a kind of stagnation is encouraged,” states the CoreData research.
“Strong cultures can reinforce beliefs that businesses are unchallengeable. The sales culture of financial planning has been built over many years and while many planners have long abandoned this approach, a vocal minority remain resistant to change and intent on ignoring the writing on the wall.”
How the numbers fall
On a positive note, CoreData’s Readiness for Change research found 70.1 per cent of respondents say management within their business has generally been encouraging of change in the past.
These are positive signs for the industry, given that resistance to change and a failure to effectively communicate change are two common roadblocks when it comes to successful change management.
However, division remains a major factor, with more than half of financial planners (53 per cent) reporting the FoFA reforms will have a negative impact on them, two in five (42 per cent) of the opinion that the reforms will have a negative impact on their clients, and three in five (60 per cent) anticipating an adverse impact on their business.
“The attitudes held by those in the negative camp are not conducive to change and suggest these planners have low readiness for change,” stated the research.
“Indeed, a majority of respondents (57 per cent) say that FoFA will not assist in the growth of their business in the next 12 months, while a further 30.3 per cent are on the fence.”
But despite this prevailing sentiment, CoreData concluded that we might not see the mass exodus from planning that many industry pundits have predicted.
The research revealed just 10.1 per cent of respondents intend to leave the financial planning industry in the next two to five years – a far cry from the 40-per-cent fallout rate forecast by some.