Historically, Trust in finance was viewed as fundamental and underpinned the banking industry from its outset – in fact, the word ‘credit’ is derived from the Latin word for ‘trust’.
In more recent times however, the 2008 financial crisis prompted a swathe of mistrust to sweep the financial sector; bonuses had grown bigger and bigger as transparency dwindled and significant regulatory steps had to be taken in an attempt to rebuild faith in the sector.
The poet Robert Frost summed up the sentiment towards financial services institutions; “A bank is a place where they lend you an umbrella in fair weather and ask for it back again when it begins to rain.”1 This is echoed in the 2019 Edelman Trust Barometer which, despite showing a gradual increase in trust over the past five years, highlights Financial Services as the least trusted of the industry sectors2.
There are a number of factors contributing to this view, one of which being the widely reported sums of bankers’ bonuses. Such reports are instrumental in the view that there is no greater Purpose in financial services than profit.
However, this all-consuming focus on profit hasn’t always been the driver of financial institutions. A British economist has highlighted that, “For nearly all of its 2,000-year history, the corporation has combined a public purpose with its commercial activities. It is only over the last 60 years that the idea that profit is the only purpose of business has emerged.”3 This quest for ever increasing financial gains is not a Purpose which inspires trust, nor does it sit well with the regulators.
Time to make a change?
Banking culture is under increased scrutiny by the FCA, whose approach now has a greater focus on culture and governance – as is highlighted in our recent white paper at HSM, which uncovers this in more detail. ‘Purpose’ has been highlighted as one of the four key drivers of culture and behaviour which firms can identify and proactively influence.4 In his outgoing speech as Chief Executive of the FCA, Andrew Bailey emphasised the importance of culture in driving more ethical behaviour: “culture is about encouraging and incentivising good things, not just stopping bad things from happening.”5
Action needs to be taken by many firms in light of these new conditions, to consider and clarify the wider Purpose and to enable the associated values and behaviours to permeate the sector. There is an opportunity to use this moment to more broadly transform the social impact of financial institutions and not merely allow these considerations to become a tick-box exercise.
Adopting a more Purposeful approach
A clear Purpose not only highlights the aims and direction of a firm, but also earns greater understanding and trust from the public. A number of financial institutions have considered their Purpose and taken a more holistic view of their aims and responsibilities for customers, employees and society. They are driving real mindset shifts in their approach to everyday tasks, building a customer centric approach where employees at all levels embody the traits and behaviours of the shared goals, ultimately helping to achieve the progression and betterment of society.
However, we can’t just forget the financial targets; firms need to flourish to be able to achieve their goals. However, financial gain should no longer be the sole objective. Indeed, impact of Purpose is profound and a clear link can be drawn between it and performance, with firms demonstrating a deeply ingrained Purpose correlating strongly with ten-year shareholder returns.6
Financial Institutions have the ability to play a significant part in the inclusion, growth and enrichment of society; but this has to be reflected in their Purpose. It may just be that the power of Purpose could be the catalyst for rebuilding trust, better businesses and a more sustainable society.
I’d love to hear more about your experiences of the power of Purpose. If you would like to have a discussion, please get in touch with me at firstname.lastname@example.org