Key Points

• The consequences of 'trust deficit' could be 'catastrophic': Mr Shipton stated that currently there is a 'trust deficit' in the financial sector, and more specifically that given the 'high levels of trust in the infrastructure that supports our [financial] system' there is overall a low level of trust in the sector due to the fact that 'Australians don’t look to people in finance with enough trust'.  Commenting on the consequences of this 'trust deficit' Mr Shipton stated that 'sustained degradation in trust in the people in finance will eventually start to degrade trust in the financial infrastructure itself. And this would be catastrophic'. 

• How to be 'trustworthy'?  To rectify the trust deficit in finance, Mr Shipton argued, 'we need to recognise that: first, we must work hard to earn and re-establish trust; and second, that this rebuilding must be done by establishing the trustworthiness of people in finance through: competence, care and ethics'.

• Higher standards of professionalism are necessary to address the trust deficit: Observing the similarities between the characteristics of professionalism (competency and conscientiousness) and trustworthiness (competence, care and ethics) Mr Shipton suggested that adopting higher standards of professionalism would be effective in rebuilding trust.  He added that doing so would have 'other benefits'.  'If you put yourself in my shoes – those of a regulator – you would ask yourself ‘why are there so many examples of poor conduct in finance? One view is that there is a lack of professionalism throughout the sector' he said.

• A 'window of opportunity' for industry to take the lead without regulatory intervention: Mr Shipton stated that though ASIC 'will play its part' and 'stand ready' to advance the goal of heightening professionalism in the sector 'Another way is for the industry itself, working with standard setting and professional bodies, to promote and perhaps even require, professionalism within their sectors. In other words, there is a window of opportunity for the industry to take the lead without the imposition of a regulatory catalyst'.

• The vital role that finance plays in society and the need to recognise 'every cent in the financial system is "other people's money"': Mr Shipton also spoke about the 'vital' role finance plays in society and emphasised the need to 'recognise, every cent in the financial system is "other people's money"'.  He added: 'This means that the financial industry needs to look at its broader value proposition. And what I mean by this is, they need to ensure that the service they are delivering is mindful that it relates to other people's money and, whatever the service may be, that it is firmly anchored to one of the core functions [capital allocation, intra generational transfers of wealth, hedging and insuring against risks and the payment system] of finance'.

[Sources: ASIC Annual Forum 2018: Opening Address by ASIC Chair James Shipton 19/03/2018]