As I write this column, the news is full of dire articles about the impending U.S. default on its loan obligations. The great debate over our budget has me musing about the meaning of the term “full faith and credit,” especially how it relates to the ethics of selling financial services today.
What it means
The term “full faith and credit” actually has a specific legal meaning. It refers to a specific clause in the U.S. Constitution that requires all states to recognize the legislative acts, public records and judicial decisions of the other states. It was hoped this would unify the country, yet give the states proper autonomy. Over time, though, “full faith and credit” has been used in many other contexts, including the notion that the U.S. unconditionally guarantees its financial obligations. Regardless of your political ideals, you have to wonder about the wisdom of doing anything that damages that faith. Because once a government loses public confidence in its financial integrity, it’s tremendously hard to rebuild trust.
In much the same way, financial advisors have their own “full faith and credit.” Your clients agree to do business with you because they believe you are competent, will provide suitable solutions and agree to be there for them when they need service, not just tomorrow or next week, but years or decades from now.
Yet anyone who reads the financial media knows that advisors sometimes act in ways that erode that faith.