In three sentences, AMP CEO Alexis George offered a stunning admission unthinkable by a financial services executive just a few years ago.
“If we go back into cross-subsidisation of whatever products with advice, you end up with conflicts,” George told the Professional Planner Licensee Summit in the Blue Mountains a few weeks ago.
“And, as anyone who lived through the [banking] royal commission will know… we got ourselves into trouble because we weren’t able to manage the number of conflicts that existed. Advice should be valuable for advice.”
It was not the first public mea culpa made by a leader of AMP since the royal commission. The iconic wealth manager – which was accused of criminal wrongdoing by the commission and has lost 70 per cent of its market value since – has apologised multiple times for the harm caused by its past misdeeds.
But nonetheless, it is worth reflecting on just how much things have changed. For years, industry figures whispered about the ills of vertical integration. Journalists, including yours truly, wrote detailed questions about the subsidies and incentives in place. They were consistently denied or ignored.
So, it is a big deal that, five years on, we are now finally able to have a candid discussion about the conflicted models that were widespread (if somewhat secret) not that long ago. The answers to those questions are now belatedly available for any Australian to read in the form of Kenneth Hayne’s final report.
The royal commission came at a great cost to the industry: commercial, reputational and emotional. But looking back, the painful truth-telling process was necessary – not only because it provided to many victims a sense of justice, but also because it has allowed the broader financial industry to reset its relationship with the public and the press.
Arguably, it is only because of that reckoning — and the more honest communications we now hear from our industry leaders, that we can even fathom the kind of discussions now being held with government about winding back some of the more onerous red tape imposed on the industry over the past two decades. In other words, it has been an important part of the industry beginning to regain the trust upon which its services have relied for centuries.
Tell a more positive story
The great upside of no longer wasting energy deflecting questions about misconduct and conflicts is that the industry now has an opportunity to tell a more positive story, one that reflects the great bulk of everyday activity in the financial system.