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Earlier this week the Australian Bankers’ Association (ABA) released its Reference Checking & Information Sharing Protocol stating “To help banks employ only competent and ethical financial advisers, the banking industry has today announced a new, improved way of hiring financial advisers”.

ABA Executive Director – Retail Policy; Diane Tate was quoted in the accompanying press release:

“… the banking industry has developed a protocol to make it easier to check how financial advisers have performed in previous jobs.

“This will better identify financial advisers who have not met the industry’s minimum legal and ethical standards, and help employers make more informed recruitment decisions,” she said.

The protocol sets minimum standards for checking references and sharing information, through a series of standardised questions and record keeping practices.”

The protocol was developed with input from regulators and other stakeholders. Subscribing licensees will need to make changes to their recruitment practices to comply with the protocol by 1 March 2017. AMP, ANZ, Westpac, Macquarie, Bendigo and Adelaide Bank, CBA, NAB and Suncorp, together representing 38 per cent of the financial advice market in Australia, have signed up to the protocol.

Having read the twelve page protocol my conclusion is that it’s a heartening development in the importance of having a rigourous and consistent process in place for the reference checking of potential employees. The ABA have been compelled to act after recent scandals that have badly dented the credibility of both financial planners and the Australian financial planning sector.

Recruiting financial advisers is a tough gig (my search on Seek for Financial Advisor, $60k-$200k, all of Melbourne, generated 243 results). It’s very hard to recruit and retain decent ones.

Therefore whenever a financial advisor resigns or is fired, then starts applying for other jobs, they have little trouble obtaining interviews and, subsequently, offers of employment. As most recruitment processes call for reference checks to be done as the final step before an offer is made, there is a significant likelihood that the hiring manager is relieved to finally be at the end of an, almost always, long and frustrating process and, therefore, already emotionally committed to the candidate. This level of emotional commitment is likely to lead to an offer of employment almost regardless of what happens at the reference check stage.

This ‘relieved’ hiring manager, about to hire an ‘experienced’ financial advisor, most likely does one of the following:

  1. Doesn’t bother conducting any reference checks (believing both what the candidate has told them and that they are a ‘good judge of people’).
  2. Intends to conduct reference checks but the referee (mostly, with good reason), doesn’t return their call(s) or email(s), consequently the reference check is never undertaken.
  3. Conducts reference checks with a person/people nominated by the candidate who is/are not relevant referee(s) (eg a colleague) or who are in not in a position to provide the depth of information that the ABA is clearly outlining in the Reference Checking and Information Sharing Protocol.
  4. Conducts a reference check with the right person but without undertaking the necessary preparation. Consequently few, if any, of the necessary questions to validate the person’s ethics or capabilities are asked. Without these questions very few referees will volunteer damning information that is likely to prevent the ex-employee from obtaining an offer of employment.

The predictable outcome of any of these four scenarios is that the candidate is hired; they deliver poor outcomes for their new employer; are fired or resign and the cycle starts all over again.

A recent example of the predictability of this pattern in any skills short market is the jailing of a payroll officer who stole $4 million from her employer, Visy, over a seven year period, having been employed by Visy shortly after being released from jail for (yes, you guessed it) stealing from two previous employers.

The rigour in the ABA protocol is to be found on pages 8 and 9 where the template reference check form lists a number of very specific, evidence-seeking questions to ascertain the facts of the financial advisor’s performance and conduct.

Overall I believe the ABA initiative is a welcome one. The reality is that all industry associations would be well advised to do something similar for their members as in my experience most reference checking, regardless of industry, is of poor quality and of little value to the prospective employer.

I’ll follow the outcome of the ABA Reference Checking & Information Sharing Protocol initiative with a great deal of interest over the next few years. Of particular interest is whether its implementation prompts other industry or professional associations to undertake something similar.


related blogs

Hire then fire: Who’s slipping through your background checking net?

Myer sacks lying executive on his first day: How were they duped?

The Sobering Facts About Employee Fraud


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