Compliance and culture: finding the balance in Financial Services

Financial services is one of the most heavily regulated industries in the world, having a sizeable impact on organisational culture. Recent regulation, such as the Consumer Duty & The Senior Managers Regime (SMCR), has put increased pressure on institutions and individuals to prioritise customer outcomes above all else. While this has led to positive change in many cases, some of the unintended impacts on organisational culture include heightened bureaucracy, more red tape, slow decision-making and unempowered teams – a difficult environment for culture to thrive.

How can financial services firms avoid the negative impacts? After all, investing in organisational culture should help, not hinder, customer-centricity and compliance. What if prioritising culture in this context could result in empowered teams, faster decision-making and a more engaged workforce?

Tip 1: Promote psychological safety

Open communication, innovation and trust are critical to culture evolution. By nurturing psychological safety, leaders can enhance collaboration, reduce turnover and improve staff morale – ultimately driving more resilient and high-performing teams.

Speaking recently with a HR & People Director In Financial Services, they shared that psychological safety is about “how supported you feel to drive change, take calculated risks and ask the difficult questions that need to be answered to improve.”.

The first step leaders can take is to make their colleagues feel included. But how can this be done in practice?

1. Re-define failure in your team. What’s classed as failure versus what’s trialling a new idea? Have you created sufficient space, capacity and bandwidth for your team?
2. Prioritise respect and wellbeing in your team meetings, create space for open dialogue and avoid ‘toxic positivity’.
3. Encourage feedback from all levels as part of your working rhythm.

These interventions are effective at driving the behaviours that enable culture to thrive in a highly regulated environment.

Tip 2: Empower ownership, not just accountability

Regulations such as the SMCR and Consumer Duty have been designed to hold financial services firms and individuals more closely accountable.

While regulation has undoubtedly improved accountability within the sector, it can inadvertently create a culture of caution. Accountability is a good thing, but only when it’s paired with actual ownership.

Another People Director we spoke to commented, “Companies need to clarify precisely what the regulatory framework entails. How deeply does it penetrate? Where should we draw the line? How does it translate within high-pressure, fast-paced environments? I’ve observed instances where accountability is pushed down the organisation without giving employees the ownership they need to succeed, resulting in paralysis.”

To address this, leaders should encourage their teams to take ownership and not just be accountable. This means being a co-designer in strategy, design and approach—not just execution.

1. Consider how your strategy and approach translate into your team’s roles. Work with them to understand what they can shape and what they can control.
2. Create governance that allows for open discussion, not just reporting, so your teams feel closer to decision-making.
3. Link KPIs and results to the outcome, not just the target. Get your team talking about their impact, not just their daily workload.

This approach can foster a more profound personal commitment, motivating employees to identify opportunities, make informed decisions, think independently and proactively address challenges. In the context of Consumer Duty, getting this right means organisations can comply ‘through consent rather than force’.

Tip 3: Get creative to reframe regulations

Regulatory requirements are a great catalyst for innovation and fostering a creative culture. We’ve seen leaders reframe compliance from merely tick-box exercises into value-add activities, improving customer outcomes, conduct and operational efficiency. For example, the Wealth Management industry has used the opportunity to rethink its charging structures, aligning its fees with the corresponding level of service provided.

How can you implement day-to-day innovation into your team’s decision-making?

• When thinking about the customer, implement interactive role-play scenarios or visual storytelling to help with empathy and visualisation. This helps create a deeper connection with the customer, understanding their wants and needs.
• Implement new frames of thinking to simplify and target the problem. One HR leader we spoke to started to ask their team, ‘what else might we stop?’ as a way to get their teams to really focus on where they could remove non-value adding processes and improve regulatory compliance.

Getting started

Wondering how to get started? First, pick one top tip that resonates the most and applies best to your organisational context. Test the recommended interventions and measure their value. If successful, you can scale or adapt as needed.