In just the short year since the findings of the Royal Commission were published, we’ve already seen rapid change, with the regulators flexing their new enforcement muscles.

What’s more, you should be bracing yourself for more intense regulatory scrutiny on the horizon, as ASIC and APRA strive towards improving customer outcomes, transforming culture and governance, and enhancing resilience across the industry.

With the regulators strengthened approach and more complex rules to navigate, comes increased compliance costs for you. And when you’re also under pressure to hit your commercial goals, we know it can be hard to get the balance right when you’re facing huge regulatory change.  

Over the years, compliance and fair customer outcomes have often taken a back seat to profit – the Fees for No Service scandals have been some of the most costly for the big banks. But if business decisions don’t deliver for customers, any profit is likely to be short-lived, and will now almost certainly attract regulatory attention.  

Want to navigate regulatory change in the most efficient and effective way possible? Here’s a couple of things you need to focus on: 

Creating the right culture 

No one sets out to create a bad culture. But if financial results take precedent over customer outcomesstaff will often resort to behaviours that deliver the short-term gains they’re rewarded for, rather than doing what’s right for your customers. Left uncheckedand you’ll start to see a poor culture emerge. More often than not, this is the driving force behind widespread conduct failings.  

A healthy culture, on the other hand, will lay the groundwork for long-term success and make your business more adaptable in the face of regulatory change. Inspired staff, who feel like theyre contributing towards something more than just generating profit, are more likely to ride the waves of change with you and continually keep customers at the forefront of everything they do. And good customer outcomes means loyal customers and a happy regulator. What could be better?  

While that sounds like a no-brainer, firms often end up making superficial changes and hoping a good culture falls into place. But driving real cultural change takes a concerted effort and a purposeful strategy 

We know culture better than anyone else. Our Culture & Conduct Risk Assessment will show you what you’re doing right, where you need to improve, and how to make the most of your resources. Download our infographic to see how we do it.

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Reviewing your business model 

To effectively respond to regulatory change, your business model needs to be adaptable, commercially sound and rooted in strong governance.  

 Vertically integrated business models in particular came under fire in the Royal Commission report. While it’s a surprisingly common practice in the Australian financial services sector, it inevitably raises questions around conflicts of interest that can’t be ignored. Thvery nature of the model makes governance and oversight much trickier to navigate.  

So if you do operate a vertically integrated business model, the inherent conflicts of interest mean demonstrating a strong, customer-centric culture becomes even more important. While not outright banning vertical integration, Commissioner Haynes made a couple of recommendations that’ll make it less appealing. This includes the banning of grandfathered commissions, which will come into force in January 2021. Plus, mandating that all ongoing advice fees be renewed annually by the client, in an effort avoid any more Fees for No Service scandals.  

Need help with your business model? We’ll give you expert guidance to make sure yours is up to scratch.

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