While shows like “Ozark” and “Breaking Bad” are entertaining, they make breaking ethical codes seem both commonplace and glamorous. In reality, it only takes one bad apple to cause an ethical upheaval, and the results of bad actions are far from alluring. We, as financial advisers, have a responsibility to lead with ethics.
Ethical standards are incorporated into every facet of the day-to-day work of financial advisers. We are all fiduciaries first and foremost. It’s no secret: Our career field is best suited to those who live and breathe ethical behavior.
A recent study by researchers at MIT found that financial advisers with more rules and ethics training are one-fourth less likely to participate in unethical behaviors. With much of our work now taking place remotely and webinars becoming increasingly accessible, advisers should consider seizing the opportunity to tap into available ethics training.
When it comes to ethics training, many assume it’s a matter of checking a box. At my firm, that is not the case. In keeping with industry standard, we participate in ethics training on an annual basis.
However, it’s how the training is carried forward into practice that is perhaps most important.
As financial advisers, we pride ourselves on being held accountable for every action we take and guiding our clients to what we believe is right, based on our experience and understanding of the current climate. Advisers should be empowered to demonstrate leadership by challenging the status quo and actively discussing, teaching and learning ethics from their colleagues. There is no better time than the present to revisit those discussions.
Part of our role is to know that pitfalls may lay ahead for clients. Amid the current pandemic, increased uncertainty can lead clients to a state of duress and fear. Advisers well know that alerting clients to changes in their investments, such as those related to COVID-19, may create an even greater sense of concern. Remind clients that using fear as a motivator can cloud judgment and that it's best to set emotions aside when making financial decisions. Help clients practice sound judgment by providing various options, explaining the pros and cons, and reminding them that situations are not always black and white. Empathy in advising is critical, now more than ever. We are all in a heightened state of emotion.
If a client makes an unethical request, don’t assume he or she has ill intentions. Communicate to ensure that the client understands the appropriate path forward. Ask clarifying questions to see whether there is a misunderstanding, and if it's necessary, eradicate unethical behaviors at the onset. It is our duty and responsibility to guide clients to ethical investing conclusions.
Amid the current climate, many of us are working remotely. Though we might prefer face-to-face meetings, we are now doing what we can to leverage our resources and technology to maintain a strong relationship we can with clients. Whether in-person or online, focus on what is best from the perspective of both client service and ethics. When you do, you can ensure success for yourself and your clients, and leave the risky behavior to the characters on TV.
Keith Harder is principal and financial advisor at Rehmann Financial.
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