Several months ago, an agent approached me with an ethical concern. Formerly affiliated with a large FMO, he claimed its advisors were telling seminar attendees to expect a 4 to 6 percent return on their annuity purchases, despite the typical 2 percent payout with competing products. What’s more, he alleged the FMO was benchmarking its annuity contracts’ performance to a 3 percent bond and S&P 500. However, instead of illustrating a current, lower-yielding annuity, it compared those investments against a higher yielding annuity from more than 10 years ago, strengthening the case to buy its offerings.

The agent brought his misgivings to the FMO’s owner and top producers. But this just created bad feelings, ultimately sparking a cease-and-desist letter from the FMO’s attorney. Unable to square his ethical values with what he perceived to be the FMO’s deceptive sales practices, he moved to a competing organization.

Granted, I just heard one side of the story, and perhaps the FMO had legitimate reasons for illustrating its annuities that way. But I understood why the agent was concerned, and I admired him for leaving on his own terms.

How would you have responded? Report the violators to regulators as I suggested last month? Team up with other advisors to launch your own shop? Quit and join another FMO? Difficult choices, but the key is to ACT! And that takes moral courage.

Moral courage is important because there are powerful forces defending the status quo. When you challenge bad actors, nasty things can happen, and advisors and their families can get hurt. So when confronting unethical conduct, you must have the courage of your beliefs and the wisdom to choose a response that doesn’t wreak havoc on you and on those you love.

Rushworth M. Kidder, an ethics consultant and writer who died some years ago, illuminates such decisions in his book “Moral Courage.” He said that having ethical values is not the same as living those values. One can be ethical, he wrote, but also lack the moral courage to move beyond ethical reasoning into principled action.

Rushworth goes on to share several key characteristics of moral courage:

  • Know the core ethical values you’re willing to fight for, even at great personal cost.
  • Have a clear picture of the risks of fighting for those values.
  • Be willing to endure both external and internal attacks, from status quo defenders and your own self-doubt.

So the next time you witness a colleague or competitor using seminars or designations to deceive prospects, will you stay silent or defend your values? I hope you take the latter course. To that end, here’s a path you might consider following: 

  1. Share your concerns with your FMO. Focus on behaviors, not personalities, and brace yourself for angry blowback. Also be prepared for the line, “How could you do this after everything we’ve done for you?”
  2. Encourage the FMO to reform its practices. Enumerate the benefits of doing so for all concerned.
  3. Think hard about the wisdom of filing a regulator complaint. It may embroil you in an investigation that makes it difficult to continue writing business. And it may even make it hard or impossible to find another job.
  4. If the FMO refuses to change, remove yourself from the situation. This is difficult, but often the best action to take.

If more advisors adhered to this path, I believe we could extinguish the industry’s smoldering problems with seminars and designations in relatively short order.