Proponents claim that the Labor Department’s fiduciary standard rule for retirement-account investing is beneficial to clients. So what’s in it for financial advisors? Greater profitability. So says Dr. Bruce Weinstein, corporate ethics trainer and international speaker on ethics and honesty.
In an interview with ThinkAdvisor, he discusses how advisors will, long-term, become more prosperous if they’re guided by the Labor rule. Further, he points out the top two crucial high-character qualities that FAs need to have and, at the other extreme, how the internet can permanently tarnish a practice.
Dr. Weinstein’s mantra: “Being ethical is cool — and profitable.” He argues that character is “the missing link to excellence.”
Dubbed “The Ethics Guy,” Dr. Weinstein, 56, has been a keynote speaker for numerous financial organizations, including the Investment Management Consultants Association (IMCA), Allstate Insurance, Societe Generale Group and the American Society of Pension Professionals and Actuaries. CEO of the Institute for High-Character Leadership, Dr. Weinstein conducts a Forbes online column on the subject.
In annual Gallup surveys asking Americans to rank honesty and ethical standards in a number of professions, “business executives, stockbrokers and insurance salespeople” consistently score near the bottom, according to Weinstein. He maintains that adhering to a fiduciary standard, which in itself is ethical in concept, will make advisors true professionals and as such, generate a more positive consumer perception of them.
Formerly an associate professor at West Virginia University teaching ethics to medical, nursing and dental students, Weinstein has helped firms hire and promote employees with high ethics for more than a decade now.
His most recent book, “The Good Ones: Ten Crucial Qualities of High-Character Employees” (New World Library 2015), examines the components of high character and why people with it achieve high-quality outcomes.
ThinkAdvisor recently interviewed Weinstein, on the phone from his New York City office. The ethics authority, hired as a speaker by more than 300 organizations and groups including the National Football League and the military, discussed the 10 critical qualities of high character and how sticking to an impeccable code of ethics can help FAs prosper. Here are excerpts from our conversation:
THINKADVISOR: Why should an advisor welcome the fiduciary standard rule?
BRUCE WEINSTEIN: The root of the word, “fiduciary,” means trust. The heart of the rule is an ethical concept, an attempt to bring financial advising into line with all the other professions. A profession is an [occupation] in which everything is meant to advance the client’s interest. If advisors really want to be known as professionals, they’ll [conform to] what all other professions do by putting the client at the center of everything.
But hasn’t ethics always been important in financial advising?
With the fiduciary rule, it’s especially important. Advisors will see that it’s not only ethical but, if they take a long-range point of view, in their [financial] interest.
Do people think that most financial advisors are ethical?
Every year Gallup surveys Americans to rank the ethical standards of the professions. Pulling up the bottom half year after year [include] business executives, stockbrokers and insurance salespeople. The only group with lower ratings in terms of trustworthiness are car salespeople and members of Congress.
Some financial services groups and firms are still opposing the fiduciary rule.
That’s a mistake because in the long run, their businesses will prosper when they put the client at the front and center of everything.
A House bill to overturn the rule was recently introduced. Your thoughts?
That makes no sense. If there were a conflict about doing the right thing and prospering financially, I could understand. But there’s no conflict. If an advisor asks himself or herself, “What’s the best thing I can do to benefit myself and my firm?” the answer would be the higher character choice of making the client the center of all that they do.
But many advisors feel they were succeeding without the rule and don’t want it.
When I started giving speeches in ethics around the world, people wanted to know, “What’s in it for me?” That’s an easy question to answer if you take a long-term view: The high-character course of action is the profitable one.
Advisors who work on commission are upset about the rule.
Why not avoid even the perception of impropriety by not having any financial gain [attached to] your recommendation? That makes it pure and generates respect for the advisor. The BICE [best interest contract exemption] says that as long as you disclose a conflict of interest to the client, you’re in the clear legally. But when you’ve got skin in the game, it risks clouding your judgment.
So what could be the upshot of that?