“Faint heart ne’er won fair lady”
— Miguel de Cervantes Saavedra, Management Consultant
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Being a Responsible Manager isn’t easy.
As the industry continues to grow and adapt, it is crucial for managers to stay informed and make informed decisions that benefit their Licensee and satisfy regulators and stakeholders.
In this article, we’ll offer ten tips to help Responsible Managers thrive in a frequently changing, and largely unexplored, regulatory environment.
1. Embrace Technological Advancements
Slowly and suddenly, technological advancements are shifting, if not revolutionising, the financial services industry.
Responsible Managers should stay abreast of emerging technologies such as blockchain, artificial intelligence, and automation. Understanding how these technologies can streamline operations, improve customer experiences, and enhance security is essential for staying competitive.
Even if you don’t want to embrace technology beyond IRESS, Lotus Notes and Access, you won’t be an effective Responsible Manager if you remain oblivious to how other participants are using technology.
Some financial advisers are already leveraging artificial intelligence (AI) like ChatGPT or Claude, to complement their advice construction or client communications. Internationally, regulators are using machine learning compliance management systems, and data analytics to automate compliance processes, identify patterns of misconduct, and enhance risk assessment.
By employing intelligent monitoring systems, larger institutions can detect and prevent non-compliant activities in real-time, minimising potential harm to consumers and the business.
ASIC is already using technology in several ways to fulfill its regulatory responsibilities and improve its operations.
- Data analytics: To identify patterns and anomalies that may indicate potential misconduct.
- Reg-tech: To improve its regulatory functions.
- Digital transformation: Including a new data strategy to better manage and use the large amounts of data it collects.
- Cybersecurity: Improving its cybersecurity capabilities.
- Administration including adviser registration, breaches and complaints
2. Prioritise Data Security
With cyber threats becoming increasingly sophisticated, responsible Managers must prioritise data security.
RI Advice showed us how crucial it is for licensees to protect customer information and maintain consumer trust. Beyond embarrassing, these failure are licensee failures with significant consequences. As a Responsible Manager, you can’t simply rely on vague assurances from your IT Department or your Compliance Manager, you need to investigate, and actively interrogate, your systems and controls as well as provide adequate compliance training.
Document your arrangements and controls. Invest in robust cybersecurity measures, train employees on best practices, and stay informed about the latest security trends.
3. Foster a Culture of Compliance
In theory, by actively promoting a culture of integrity and accountability, Responsible Managers contribute to building a more robust compliance framework within their business. Unfortunately, it’s not that simple. What get’s measured, gets managed and the reality that Responsible Managers often overlook is that while regular oversight, governance reporting and proper documentation is important, focus on these elements can create a “tick-a-box” culture, where formalism – doing what is required – takes precedence over doing what’s right.
Bridging this divide, calling out malicious compliance, and promoting ethical and competent business conduct is the raison d’etre for Responsible Managers. It may be unfair given their various other responsibilities, but since many Compliance managers find leadership less appealing than quoting regulations and drafting measures, processes and procedures, the burden falls to Responsible Managers.
It’s not enough to say the right things and this is why undertaking expert compliance training is so important.
A Responsible Manager has to consistently act in a way that reinforces the business’ compliance culture and values. It is up to the Responsible Manager to set the tone and the expectation that all representatives must adhere to the highest professional and ethical standards. They must build enough trust with stakeholders (“regulatory goodwill”) to be able to avoid costly regulatory sanctions, public action or litigation. Given the vulnerability of each business’ social license, Responsible Managers really have to “walk the talk” and model exemplary behaviour. In fact, it’s this zero-tolerance approach to non-compliance or unethical practices, that ensures that their values are reflected in everything they do.
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4. Focus on clients’ needs and interests
The Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry exposed widespread instances where clients’ best interests had been ignored, resulting in faulty financial advice and significant losses. To build trust and regain the community’s confidence, Responsible Managers need to ensure that the business that they lead or support provides suitable advice, takes reasonable steps to give appropriate prior warnings of risks, maintains adequate records, implements robust complaint handling procedures and satisfies the disclosure requirements.
Consider establishing formal client feedback mechanisms, emphasise the need for “free, prior and informed consent” and maintain oversight of complaints handling can help identify areas for improvement.
5. Stay Ahead of Financial Trends
Financial markets are constantly evolving, and responsible managers must stay informed about the latest trends and developments.
Being aware of emerging regulatory, consumer or financial trends – from ASIC’s position on cryptocurrencies to greenwashing to sustainable investing – can help you make informed decisions and identify new opportunities for growth.
Digital disruption, sustainability, security, demographic shifts and heightened compliance training are the key trends Responsible Managers should be aware of, and responsive to, in shaping their strategy and operations. There’s been such a rapid growth in environment, social and governance investing as investors focus on sustainability, that Responsible Managers that don’t keep up to date on ESG funds, reporting and disclosure requirements will fall behind.
Staying on top of these financial industry movements will help you navigate change and continue to protect your business.
6. Develop a Diverse Workforce
Diversity is a business imperative for financial services in the 21st century. Yet the sector remains overly homogeneous. To stay relevant, Responsible Managers must make diversity a priority.
Diverse teams consistently outperform homogeneous groups due to cognitive diversity. When employees see issues from different backgrounds, they surface richer insights and solutions. This translates to better decisions, higher engagement, improved customer service and profits.
Commercial imperatives aside, you might conclude that Responsible Managers have a moral duty to correct the financial sector’s history of exclusion. Women, minorities and other underrepresented groups still face barriers. The sector must harness the talents of all potential employees, regardless of demographic.
Ignore Sky News. The reality is that by supporting a more inclusive culture, Responsible Managers will inspire high performance and loyalty. Achieving diversity requires effort, but the rewards for stakeholders will be immense.
7. Embrace Sustainable Finance
You’ll recall that the Royal Commission highlighted sustainability was largely absent in the sector but, since that time, Regulators and banks have committed to advance a sustainable finance agenda aligned with UN Sustainable Development Goals.
Responsible Managers should embrace sustainable finance to meet evolving demands because, byy integrating these principles and commitments into business strategies, products and services, Responsible Managers will be able to access the growing green market, appeal to ESG-conscious clients and future-proof their models.
If you are a Responsible Manager, I’d suggest that you have a moral and commercial responsibility to shift focus from short-term profit maximisation to long-term value creation balancing financial, environmental and social considerations.
8. Foster Collaboration
Years of bad-press highlighted insularity, siloed thinking and a lack of collaboration as factors that enabled misconduct. Regulators now expect financial institutions to work together, and with external stakeholders, to lift industry standards.
By focusing on forming partnerships and networks, Responsible Managers can share knowledge, best practices and lessons learned. In fact, by collaborating on solutions to issues like remuneration models, financial hardship, fraud prevention and data security can lift the standard of service for all clients.
In fact, APRA has urged financial institutions to develop “a collaborative mindset” to address risks that span the system. ASIC has pointed to benefits of engagements with fintechs, charities and community groups to promote innovation and consumer trust.
The reality is that fostering collaboration requires openness, transparency and a willingness to create shared value beyond individual financial gain. This may be a challenge for some Responsible Managers but you should realise the significant benefits that flow from partnerships that leverage diverse strengths for mutual benefit.
9. Invest in the Employees
Research has shown that employee development is key to financial services productivity, yet according to McKinsey, the sector continues to underinvest in training. Responsible Managers need to highlight this issue and prioritise staff education to satisfy regulatory expectations, lift performance and rebuild trust.
Don’t forget that the Royal Commission highlighted a lack of competency and poor advice stemming from inadequate employee training. If the stick doesn’t appeal, here’s the carrot the Responsible Managers should show – studies consistently show that employee development leads to higher motivation, retention and engagement. When staff feel their skills are continually growing, performance and productivity increases. Logically, Responsible Managers who foster a culture of learning position their businesses for long-term success in a rapidly changing industry.
10. Focus on adaptability
Adaptability is essential for Licensees facing heightened regulation, new entrants and technological disruption; it is a truth universally acknowledged that inflexible organisations struggle with change while agile firms thrive.This was so clearly exposed by the Royal Commission who revealed the sector’s inability to adapt to changing community expectations, it’s unwillingness to innovate and its complete failure to respond to misconduct.
For these reasons, Regulators now expect licensees to develop an agile, forward-looking culture and improve operational resilience.
In fact, by facilitating and supporting an adaptable workforce, Responsible Managers can help their Licensees pivot to navigate disruption, meet evolving client needs, build a competitive edge or capitalise on emerging opportunities.
Being an effective Responsible Manager may be challenging but, by being aware of your broader responsibilities, you can significantly improve the sustainability of your business while making a positive impact on the industry as a whole.
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A modified version of this article was published by FS Advice.
