Do Ethics Matter? Hot

0.0 (0)
Write Review

We face ethical decisions every day, when bringing in new clients, gathering AUM from current clients, choosing the tools we utilize, dealing with employees and managing our practices. If our primary goal is to increase revenue while minimizing expenses without working nonstop, does it matter how we get there? Does the end justify the means?

Let’s look at some everyday choices we face:

  • A potential new client asks you to evaluate what her current advisor is doing. From the looks of it, he seems to be doing a fine job. Do you attempt to convince the prospect that the advisor is not doing right by her? 
  • Your client owns a rental property that is producing a good return, while not representing a disproportionately high percentage of his investment portfolio. Do you recommend that he sell it, knowing that will increase your AUM?
  • Do you evaluate your hardware or software suppliers based solely on price and promises? Or do you also consider the integrity of the provider?
  • Do you hire primarily lower level employees and keep wages low? Do you minimize raises and push for extra work from your team in order to maximize profits?
  • Do you try to lure clients away from other RIAs? Do you badmouth your competition?

Advisors who run their businesses this way can be successful. I’m not here to say that making choices slightly outside of the lines will or should ensure financial ruin.  It’s not about “Karma.” We all must make our own choices. 

I would handle the above situations as follows:

  • If a potential new client comes in with a portfolio that appears to be invested well, I will tell the client exactly that. I will also say that her choice should be based on a multitude of factors including her comfort with communicating with her advisor and whether other services are important such as financial planning and tax preparation. I will even say that any investment portfolio that my firm manages would likely perform similarly to what she has now. I will certainly say that I would like to work with her if she so chooses.  That way, if she decides to change advisors, I will have gotten the business honestly.
  • If a client asks me whether or not he should sell his rental property, I will perform an unbiased financial analysis and allow him to make his decision. I will also proactively point out that there is a potential for conflict of interest even though I have done my best to present the information in an unbiased manner.
  • We deal in critical, sensitive, confidential client information. Integrity of the vendors and providers I work with is crucial. A company that misleads its clients or was funded illegally or cuts corners on compliance will not get my business. Period!
  • Employees are the backbone of my business. I believe in fair pay, good benefits and pleasant work environment. A team that is appreciated and not overworked will be happy and productive. In the end, that makes for happier clients and easier management!
  • In my (humble?) opinion, there is plenty of business to go around. Investors need the guidance of RIAs. There is no need to go after other advisors’ clients. By working cooperatively with your colleagues, you will establish a network of resources and promote the “public good.”

I once heard a speaker say that he always strived to meet the “grocery store” test: Would he be able to comfortably look his client in the eyes if he came across her at the grocery store? For me, I need to pass the “mirror” test: Can I look myself in the eyes and know I’m doing right?

This Website Is For Financial Professionals Only

User reviews

There are no user reviews for this listing.
Already have an account? or Create an account