Please keep it simple:
Should we put our trust in RDR?

The Retail Distribution Review has its good points, including its focus on financial professionalism. Don’t forget about the need to rebuild trust, says ROGER STEARE.

What was first known as the FSA’s Retail Distribution Review has now had the alphabet soup treatment and is now commonly referred to as the RDR. Now turning long words into hot tasty liquid may sound nourishing, but it gives me a queasy feeling. You see the last time we had some of this soup, it was the CDO (Collateralised Debt Obligations) flavour and we’re all still paying for this with the worst bout of funny tummy for a generation!

You see, I have this theory that when something must be done, we as human beings like to make whatever we do look clever and complex, because we just don’t trust each other to do things right. So bureaucrats, lawyers and professional agencies get involved and say, “OK, how do we get consumers to trust the development, advice and sale of retail financial services?”. The answer we get is a whole bunch of processes, systems and shiny new boxes to tick! There are conferences to attend, workshops to nod in, regulations to draft and courses to sell. And then, hey presto, we’ve created a tasty new way of confusing and frustrating the very people we’re supposed to be serving.

The RDR is supposed to increase consumer trust in the financial advice we receive when we want or need to buy financial products. It won’t. And the reason it won’t is for the same reasons that TCF (Treating Customers Fairly, of course) failed to increase consumer confidence in financial products. In fact, for many consumers (and providers) these well-intentioned but complex initiatives actually diminish, or even destroy, trust. To understand why this happens, we need to understand trust.

If you look up “trust” in the Oxford Dictionary, part of the definition says that trust means “acceptance of the truth of a statement without evidence or investigation”. Yes, you read it right, the phrase here is “without” evidence or investigation. This is because, as your friendly corporate philosopher is about to remind you, trust is rooted in the moral value of faith. If you look at banknotes, you’ll see the phrase “I PROMISE” on the front of sterling notes and “IN GOD WE TRUST” on the back of dollar bills. The whole of our banking and financial system is based on trust and promises. But when we break promises and betray trust, we destroy money. That’s why we’ve just had a banking crisis, followed by a recession. Banks lent money to people who couldn’t afford to repay it to buy rubbish they don’t need. This was, and is, a crisis of trust and a crisis of ethics.

So where does that leave RDR? Well, to be fair, there are some good things coming out of it. The focus on professional standards is one. But if we’re serious about building trust in anything, we need to keep it as simple as the trust we have for family, friends and neighbours. It cannot be wished into existence by pages of boxes and ticks. Trust is based on character, behaviour and relationships between real, fallible, but genuine human beings with integrity. Trust me, I’m a philosopher.

Roger Steare is a Corporate Philosopher and Professor of Organisational Ethics at Cass Business School, London.
He can be contacted at: roger.steare@ethicability.org. You can try his integrity test at www.ethicability.org
Watch Roger Steare's new video on YouTube: www.youtube.com/watch?v= unufsY1HZh8

Back to Columnists content page
Back to magazine content page