Key performance indicators (KPIs) are one of the basic tools of management. They allow businesses to be able to measure progress toward defined goals and, importantly, adjust course along the way in response to outcomes experienced.

In a corporate environment, it is normally our managers who progress toward our KPIs. In the context of an industry, however, measurement is more nuanced. It comes from our stakeholders, who comprise, among others, clients, peers, regulators, the media, competitors, government and the public as a whole. The KPIs we have as an industry will, (paradoxically) by definition, be less well defined. However, just as in our corporate environments, we will know when we are not meeting our KPIs as an industry, because our stakeholders will be telling us this is the case.

Let’s think about this for a minute in the context of providing quality financial advice.

I would argue that the KPIs applied to financial advice have been incorrect in the past. After all, if we were progressing toward KPIs that were seen as relevant to, or sustainable by, our stakeholders, why would we have had 50 inquiries into the industry and major, ongoing regulatory change since the collapse of Storm Financial in 2009?

So what KPIs have we set for ourselves historically as an industry?

Culture of quality advice

Recently the Infocus Group was asked to participate in an industry survey. The survey asked a range of questions aimed at identifying the performance of Australian financial services licence (AFSL) holders across a range of metrics. Interestingly, the most prominent metric used was year-on-year growth in numbers of authorised representatives licensed under the AFSL. This quantity-based KPI ignores any qualitative overlays (for example, the quality of financial advice provided; a “risk weighting” of authorised representatives; or year-on-year financial performance of the AFSL holder, providing insight into financial health). This raises fundamental questions about what the industry values in measuring its own performance.

Holding an Australian financial services licence is complex, particularly when licensing, monitoring and supervising a network of authorised representatives. Balancing the continued investment in people and process essential to appropriate monitoring and supervision with the demands of a commercial enterprise requires robust governance and management, capable of taking a mature, sensitive, honest and partnership approach. This goes beyond basic compliance with legal obligations: it is about ensuring the right conversations are had across organisations to promote a culture of quality advice, client first and continuing professionalism. In turn, this requires decisions that are about long-term sustainability, fostering a focus on quality advice, both for today and for the future.

Growing revenue

There are a number of tried and true strategies to grow top-line revenue in business, for example with market share able to be gained by lowering price. In a retail sales or fast-moving consumer goods environment this strategy can be very effective. However, how does this strategy play out in a highly regulated environment such as financial advice? If the cost of service provision is lowered to gain market share, how is this achieved; particularly given the input costs for human and technical capability to support effective monitoring and supervision are very similar across the industry?

I believe mature conversations about issues such as this go to the core of the type of culture we as an industry believe is not just acceptable, but required, in terms of holding a social licence (not just a financial services licence) to operate into the future.

Once we are clear on the KPIs we should set ourselves as an industry, we can start to navigate the change process toward achieving these, for the benefit of all of our stakeholders.

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