There is a general sense of resignation among consumers that bankers have lost their souls. George Bailey, the fictional banker with a heart of gold played by Jimmy Stewart in A Wonderful Life feels naïve and anachronistic in a today’s world, where people don’t lack trust in the institutions where they park their money.
The Aspen Institute set out to uncover why banking has become so complicated, and why most bankers seem short on empathy and only focused on their own short-term gains.
The pursuit of money is one obvious factor. Bankers can reap large monetary rewards by fudging here and there, bending the rules, or engaging in downright unscrupulous behavior. But money actually isn’t the primary reason that good people can turn into bad bankers.
The Aspen Institute surveyed hundreds of financial services executives to uncover five different mental models pervasive in the banking industry. These mental models are the assumptions and unwritten rules that drive thought processes and ultimately govern people’s behavior — the basic building blocks of an organization’s internal culture.
1. Complexity Bias
Psychological Principle: “The more complex the solution, the more intelligent I seem.”
The Aspen Institute found that complexity bias runs rampant in the financial industry. Banking executives frequently believe that complex ideas are inherently better — more valued by management and on a higher intellectual level — than simpler ones. Many bankers therefore believe that complexity is something to strive for, in its own right, regardless of any individual situation.
It’s not hard to find complexity bias at work in the financial industry. Try comparing checking accounts between one banking provider and another and you’ll quickly realize just how complex the industry can make even the most basic financial products.
Banking providers don’t place the same kind of premium on the experience that you tend to see in other industries. Most online startups and tech companies, for instance, insist that their experience is straightforward and easy-to-use. Such qualities aren’t seen as aspirational; they are viewed as basic table stakes. The fundamental premise that technology should be simple and intuitive helped turn Apple into a company worth around $1 trillion. This notion is often lost on bankers, who intuitively lean towards complexity over simplicity.
Cultivating The Right Mindset: Adopt a new mantra: “Keep It Simple.” Emphasizing simplicity will the most immediate and profound impact on your organization’s customer experience. Simplicity should be top-of-mind — a driving force that shapes everyone’s thinking and colors every decision.
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2. Desire for Financial Success
Psychological Principle: “Money is the best motivator. I measure success by money. The greater my financial achievement, the more respect I receive.”
The Aspen Institute says that banking execs tend to have a short-term outlook — they want to reap the fruits of one’s labor quickly — which can result in a transactional attitude towards consumers vs. building- and investing in long-term relationships. This creates a very self-interested, inward-facing effect. It winds up associated with a mix of dynamics that yields poor outcomes for consumers.
“For too long, bankers have believed the drive for financial success and recognition was a necessary byproduct of having a competitive workforce,” the Aspen Institute says in their report. “As such, the industry has tolerated a great deal of hazardous and self-interested behavior — from poor treatment of consumers to unnecessary risk appetites.”
Cultivating The Right Mindset: Promote a sense of competition that isn’t directly tied to money. Instead of competing for the biggest bonus or salary, how about competing for the best consumer experience or best ways in which staff can support their teammates? True industry competitors are like Olympic athletes – driven and aggressive, but with a larger purpose in mind.
Psychological Principle: “My interests come before the interests of consumers or the financial institution, so I will disregard rules that restrict my sense of freedom, and I won’t always show clients they have a better option if I am benefitting financially.”
Think about some of the underlying causes for the housing and financial crisis — self-interest played a big role in the ability for bankers and brokers to sell consumers mortgage products that they didn’t fully understand and that bankers know they couldn’t pay for, all for short-term gain.
Self-interest is one of the most toxic dynamics in the financial industry. The Aspen Institute says a person exhibiting this mental model is inwardly focused, cares only about themselves, has no sense of implications for others,
and at times displays a callous disregard for others. This is the antithesis of empathy, and consumers won’t stand a chance.
Cultivating The Right Mindset: Encourage empathy by rewarding employees when they go the extra mile for consumers. Ensure that they fully understand the products and services they are selling, and how they will impact consumers.
4. Recognition of Intelligence
Psychological Principle: “I’m smarter than the average person, and I want you to recognize how intelligent I am.”
The Aspen Institute says there are those who need recognition because they believe their intellect is superior to everyone else including their customers, regulators and peers. It’s the difference between someone who is smart, and someone who considers themselves smarter than everyone else.
“Bankers are gazing into a rose-colored mirror, seeing an unrealistic picture of their abilities,” the Aspen Institute says in their report. “In a world where intelligence is so highly prized, this mental model crowds out the possibility of uncertainty or doubt.”
This creates a huge blindspot and the potential for a risk management disaster-in-waiting.
Cultivating The Right Mindset: Feedback loops and reviews can be an important part of addressing this mental model – raising awareness about performance, regarding predictions as well as consumer interactions. Where warranted, develop training and new tools to help practitioners execute at the level of their perception.
5. Short-term Outlook
Psychological Principle: “I am expected to maximize revenue and I want the fruits of my labor now.”
For consumers, a short-term outlook is negative because it encourages financial professionals to take more a transactional rather than a more relationship-based approach to consumers.
Cultivating The Right Mindset: Shift from a focus on maximizing revenue at every transaction and focus on delivering results over a longer period of time. Even a move to quarterly results can begin to shift the mindset from a short-term outlook. The Aspen Institute says simply removing the pressure on employees to squeeze every penny out of each interaction with clients can change their mindsets in positive ways. While a transaction focus is associated with quick financial gains and complexity, a quarterly focus includes empathy for consumers, collaboration and investment in client relationships. This is not a solution, but should be encouraging news for executives and consumers alike.