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September 30, 2010 at 08:00 PM
It seems there is a new article in the financial press every day about a breakdown in ethics that leads to disciplinary action by one government agency or another. In addition, those in the industry know we receive notices from our own regulators citing numerous suspensions, revocations and disciplinary actions against individuals in our industry that never make the papers.
Absolute Standards
Some would say the deconstruction of ethics in our industry is a reflection of our society. There may be some truth to that, but the subject is best left to another writer. Where society may consider ethical relativism as a personal philosophy, we cannot do the same in this industry. We must have absolute standards of ethical behavior, or our industry and businesses cannot survive. In fact, those who do business with us need to hold us to higher standards, as well.
Does this mean there are not gray areas in our standards? No, there are situations where what is right may be difficult to ascertain. Nonetheless, there are also some standards that must be absolute to keep the public’s and plan sponsors’ faith in our industry.
For instance, the standard that we must not steal money from our clients’ accounts is an absolute standard. There is no gray area in this ethical standard. If I remove $10,000 dollars from my client’s account and spend it for myself, no one is going to dispute what I did was wrong, no matter how badly I thought I needed the money.
But what if I purposely overbilled the client or put the client in an investment that paid more commission than another with less benefits, or had hidden fees in my 401k program I did not disclose to my plan sponsors, or allowed a market timer to come in and profit from my clients accounts as long as I made some extra money? These are also examples of stealing money from clients, which may be less obvious but just as wrong. As we all know from the recent market timing scandals, it was not a question of whether it was wrong; it was a breakdown of ethical standards of the decision makers. Greed got the better of them. If they had higher-quality and more serious ethical training, they may not have made the same decisions.
Ethical Training
One of the problems is our industry has thousands of meetings about new product training, investment analysis, how to market financial services, technology training, etc., but how often do you hear of a conference on ethical training? You don’t. Ethical training is usually the last thing on the agenda, and the point where many people choose to go home early.
