Shipton on professionalism and reclaiming the first line of defence

  • By Christine St Anne


The findings from the royal commission’s interim report is a blight on financial services and it is now time the industry reclaims the first line of defence by embracing professionalism.

That is the assessment of newish ASIC chair James Shipton. Speaking on a panel with CFA Institute president and CEO Paul Smith (pictured right), and chaired by FINSIA CEO Chris Whitehead (pictured left), Shipton (pictured in the middle), highlighted the “one word” that remained consistent throughout the interim report   - the word dishonesty.

“That one word throughout the document highlights that the industry is nowhere near professionalism.

“All of us as stakeholders, from industry bodies to the regulator need to embrace professionalism and support values that are based on the consumer mindset. We are all dealing with other people’s money,” Shipton said at the FINSIA Summit in Sydney on Thursday.

He also called the sector to reclaim the first line of defence by “ensuring that we have a fair and efficient conduct in in the industry”.

“That is your obligation as licensed firms and is clearly set out in Section 912A of the Corporations Act. I am a sorry I am a regulator I have to emphasize that.

“It is fundamentally important because the diagnosis is in and the diagnosis is collectively that as an industry, you are not adhering to that bedrock fundamental cornerstone obligation that underpins our industry – honesty and fairness”.

Never waste a crisis

He also called on the industry to “expect more from ourselves and from each other” because as a regulator it can’t be relied on solely to solve issues around conduct. “Change needs to come from within the industry”.

He noted that financial services can learn from industries like the milk sector.

It was an industry he explored in detail at Harvard where he found robust risk management processes throughout its supply chain.

“We are not different from other industries. We are all people and can learn from the good behaviors adopted by people in other sectors.”

For CFA’s Smith, the royal commission provides the sector with an opportunity to reinvent itself.

“We should never waste a crisis. The royal commission is a huge opportunity to reconnect on purpose and build on trust by articulating what our purpose is,” Smith said.

He acknowledged that most people don’t see a clear purpose in financial services compared with other industries such as the medical sector. However, financial services does play a key role in the economy and this purpose should be communicated better.

Smith added that the sector should also not miss the opportunity to respond in a way that balances individual responsibility with regulation once the commission’s final report is released in February.  He noted that if the sector adopted “sensible steps”, such learnings can be exported to the rest of the world.

A noble purpose

Both Shipton and Smith said diversity will also be key in underpinning positive culture, conduct and ethics in financial services.

Smith said the industry had the propensity to hire Type A males from the same schools, driving a single view. “One thing that has not changed since the global financial crisis, is the hiring. We need to change the way we hire people focusing on what drives people to join our industry,” Smith said.

Here, he noted that caring for people is often among the top three factors that motivate medical people.

“This forms a sort of self-selection for a sector like medicine. We are nowhere near in picking the right people”, Smith said.

Shipton added that a broader purpose in finance is also needed in university education. Drawing on personal experience, Shipton recalled the mantra during his university days was ‘greed is good”.

“That was a crazy mindset. We need educational programs that highlight the good and noble purpose in financial services,” Shipton said.

“If we can serve the community in a noble way, we can attract and retain the right people.”