With 47 years of experience in the insurance industry and deep involvement in many of the associations that guide its direction and principles, Guy Baker knows a thing or two about the kind of ethical issues that insurance agents face on a daily basis.

That’s why we decided to spend a few minutes with Baker, MSFS, CLU, ChFC, CFP, RHU, managing director of BTA Advisory Group in Irvine, Calif., a multi-disciplinary organization serving the needs of wealthy families and owners of closely held businesses. The former MDRT President and current AALU board member graciously shared his thoughts on variety of topics, starting with his own general overview about personal ethics.

 “I think it’s a difference between knowing right and wrong and having the courage to do right when you could do wrong,” Baker said. He adds that people generally know what’s right and what’s wrong, but what they might not have is the courage to do right.

“My courage grew probably more from understanding the consequences of doing wrong, and not wanting to have to deal with those consequences,” Baker continues. “And then learning to love doing right. There was a progression. When I was a kid, I probably wasn’t the most ethical kid. I knew right from wrong, but as I paid the price for making the bad choices I began to realize what was right was right for more reasons than just not getting into trouble.”

Insurance agents are faced with having to balance their ethical responsibility to clients with common sense and reasonable expectations, Baker said. As a board member of the Association for Advanced Life Underwriting, he constantly keeps up with regulatory issues that could potentially impact life insurance’s longstanding tax-advantaged status.

Guy Baker“If I were to share with clients every possible permeation that comes out of Washington D.C., nobody would do anything,” Baker said. “Ninety-five percent of everything they talk about out of Washington never happens, so what’s my ethical responsibility? Warn people away from this, that and the other thing?”

One of the biggest issues in the industry is inside buildup, where the federal tax code favors permanent life insurance by permitting premiums to be invested on a tax-free basis. That favored status is frequently threatened by Congress, and constantly defended by lobbying efforts of AALU and other industry organizations.

“If every time they started talking about inside buildup I let that keep me from selling a life insurance policy, I’d have been out of business,” Baker said.

Even for a highly decorated, extremely successful agent like Baker, ethical dilemmas do come up and the best course of action isn’t always clear.

Baker’ story of a lawsuit with a client where he had referred a pension administrator to the client. The pension administrator followed all the laws and did everything according to best practices, but when the government changed the rules, the client got nervous and mad and sued.

“Were there any ethical issues in that? Should I have warned them more severely about the issues? In this particular case they were all starry-eyed, loved the deductions and wanted to go forward with it,” he said.

They didn’t really want to pay much attention to the details and had more of a “Where do I sign?” attitude, according to Baker. “It was after the fact when they began to get worried and their advisors got worried. Everything started crumbling. That’s definitely an ethical dilemma probably many agents today are dealing with because, how much responsibility do you take for your client’s lack of wisdom?”

The challenge of working ethically means that agents will inevitably encounter situations where there are competing obligations, or it may become apparent that the client’s ability to make sound decisions is diminished by a lack of proper understanding.

What can an agent do? Always strive to present, accurately and honestly, all facts essential to your clients’ financial decisions, according to Baker.