It’s always disappointing to talk to a financial planner at a conference and to learn that the issue on the agenda they found least interesting was the one focused on ethics.
Sure, ethics isn’t as sexy as, say, how to maximise the sale price of a practice, or how maximise a client’s long-term investment returns. Nevertheless, a recent conference heard that a financial planner who has no interest in and no grasp of ethics is not someone who the public will necessary trust to act in anyone’s interests other than their own.
Ambivalence about ethics is actually not optional for a member of a profession. You’re either in, or you’re out. It’s not optional, because ambivalence undermines the foundation of a profession; and it is not optional because the only reason the public is prepared to countenance a profession is because of the ethical behaviour and conduct to which professionals are held accountable and expected to adhere. You can’t have your cake and eat it too.
But there are other, more prosaic reasons why behaving ethically, and embracing ethics as a cornerstone of a profession, may also be in the professional’s own interests.
Ethics can’t be an optional extra
At the PortfolioConstruction Forum Conference in Sydney last month, Charles Sampford, a director of the Institute for Ethics, Governance and Law at Griffith university, said that “ethics and integrity cannot be optional extras”.
“They must be built into what we do, how we do it and why we do it, otherwise it is just more spin,” he said.
“[Ethicist Peter] Singer says that the fundamental ethical question is: ‘How do we live our lives?’ This involves asking hard questions about our values, giving honest and public answers, and trying to live by those public answers. If we do, we have integrity, we are true to our values, we are true to the sense of self that we project to ourselves and the world; and if you don’t, then the first person you cheat is yourself, because you are not the person you claim to be.
“But of course, we are not just a world of individuals. We are social animals, and we live our lives through a set of institutions, which create the best and worst experiences of our daily lives, but are basically designed to make human life better. Political institutions, corporations, professions, unions, even Royal Commissions, are all designed to make our lives better. And so some of the most important ethical questions and ethical dilemmas are not just about what we do as individuals, but what we do together. This raises the issues of institutional ethics, with which people are far less familiar.”
Sampford said the ethics of instititions is “very, very similar to individual ethics”, and that it “involves asking the same questions as you do for an individual”.
“You’re asking, how do we live our lives together in this organisation – in a corporation, a profession, doctors, lawyers, accountants and possibly investment advisers,” he said.
“That’s an interesting debate we’re having at the moment, as to whether that is or should be a profession, and what its value should be.
“This involves, again, asking hard questions about the value of the institution. Why should it exist? What justifies it to the community which permits it and provides resources and very often privileges – not least such things as easy incorporation and limited liability.”
Embracing ethics can win customers
Sampford said that embracing ethics – publicly and proudly – can pay off for the individuals concerned because customers and clients will sometimes make a calculation that they would prefer to deal with someone “fanatically ethical” than with someone who might be prepared to rip them off if they think that will make more money that way.
He said this is an “advantage of the ethical approach of saying ‘I won’t do it because it’s wrong’, as opposed to ‘I won’t do it because I believe it would be less profitable to do so’”.
“Say you’re dealing with two businessmen,” he said.
“One of them says: ‘I really don’t think screwing you would be in my long-term interests, so I won’t screw you.’ And the other one says: ‘I’m not going to do the maths, and I wouldn’t do it anyway’. Who would you prefer to do business with?
“I think you’d prefer to deal with the person who is fanatically ethical, who won’t do it as a matter of principle, rather than one who will only do it unless he thinks he can make more money out of screwing you than not screwing you.
“It’s called a ‘transaction cost’. If you’re dealing with the first person, who will screw you if he thinks it’s in his interests, you’ve got to think, am I the unlucky guy who he’s going to make so much money out of screwing?
“The transaction costs with the second guy are less –you don’t have to go into so much detail as to whether or not he’s going to screw you.”
