If you were to ask a room full of professionals what the key tenets of professional behaviour were, you’d probably find adherence to a code of ethics ranks high on the list.
Similarly, if you asked those same professionals whether they would consider themselves professional, you’d probably find a substantial number would say yes.
There is little debate that ethics, pinned to a formal code, is at the foundation of any profession. In fact, the Professional Standards Council defines a profession as a “disciplined group of individuals who adhere to ethical standards”.
For good reason. It’s often breaches of ethics that get corporations within and outside of financial services slapped on the front pages of websites and newspapers as their scandals become the subject of debate around the dinner table or water cooler for weeks and months.
“It was the supervisor’s failure,” one argues.
Another replies: “No, it begins and ends with the practitioner; they should have known better.”
Although financial planning’s code has yet to be formalised, practitioners who want to be perceived as professional are already working towards an ethics framework.
As the profession matures, experts say, graduates will seek employers who offer planning roles with high ethical standards and reject those who fall short, while employers will seek recruits with the acumen to navigate the variety of ‘grey areas’ that come up daily in client relations. However, how both parties will pursue those aims is not clear-cut.
Martin Mulcare, founder of consultancy Etiam, hosts scenario-based workshops for financial planners with a specific focus on ethics. He says there are no right or wrong answers and participants can demonstrate highly evolved thinking without producing a textbook answer.
If you were to ask the aforementioned room of professionals how they would respond to a dilemma with a client, they’d probably produce several different answers, and that’s OK, says Mulcare, who cautions against asking whether someone is ethical, because of the vague, but pointed, connotations.
“I prefer to ask, ‘How do people make decisions?’ “Mulcare says. “Or, as Socrates said, ‘What ought one to do?”

No litmus test

In a famous 1977 article in the Harvard Business Review, professors Steven Brenner and Earl Molander posed four scenario-based questions designed to answer whether the business of ethics was changing.
Naturally, if there were a way businesses could test whether their potential employees had the desired moral character – and a way for a profession to measure the same attributes to determine entry – such tests would be in high demand.
Hugh Breakey, a research fellow at Griffith University’s Institute for Ethics, Governance and Law, recently asked whether an exam could be used to test professional elements, including ethical understanding, in a paper co-written by Charles Sampford and published in the UNSW Law Journal. The pair concluded that while a national exam could measure a number of knowledge competencies, it could not completely measure a participant’s ethical understanding.
“The ability to motivate people to behave morally in general is not something that we have any really, really reliable way of understanding and then implementing in practice,” Breakey tells Professional Planner.
Unfortunately, until someone has been exposed to an environment where their morals are tested in a professional context, it’s difficult to know for sure how they will behave, he says.
“The information you have when they are about to enter the profession is not actually very good information,” he explains. “The types of temptations and pressures are not what they have been exposed to before. Just because a person has been virtuous in one area, doesn’t mean they’re going to act the same way in a new setting.”
Mulcare agrees there’s no easy litmus test to tell how someone would behave when faced with a real ethical dilemma.
He uses an example from his workshops, where people are in a room with about 50 of their peers and are asked how they would respond to a certain situation. It becomes obvious sometimes that, surrounded by peers, some of the planners are influenced by the decisions of others.
“It’s also harder for people who are relatively junior to throw in their decisions, particularly if they are there with their practice principals,” he says.
But there are certain ways employers can gain insights into their employees or prospective employees’ thinking patterns.
“One way may be to present them with a situation that you faced that tested you and ask them what they would have done,” Mulcare says.
In an interview, a prospective employer could ask about situations they have faced in past roles and what bothered them about the particular encounter.
At a time when financial planning has not developed its profession status and has been subject to scandal, the next generation of professional planners will approach the industry with “appropriate skepticism”, Mulcare says, and the onus will be on employers to prove they meet planners’ expectations.
“The person on the [employee] side of the table is going to be skeptical and it’s up to the employer to validate that skepticism,” he says. “I would be encouraging principals to give examples of decisions that were made in their practice and how they reached those decisions and how that matched their values”.
Victoria Whitaker, co-head of advice and education at The Ethics Centre, says evidence shows Millennials, in particular, will veto a role with a competitive salary if the culture of the organisation does not match their values.
“[The more progressive organisations] can articulate their purpose – why they exist – and have a recruitment process that, end to end, reflects their values,” Whitaker says.

The shifting tide

More well-established professions, such as medicine and law, tend to lean towards professional archetypes, and Breakey hopes as financial planning develops the characteristics of a profession, it will follow the same path and attract morally minded individuals.
“[In established professions] you’re starting, presumably, with a stock of people who are predisposed to live up to professional ideals,” he says. As the Financial Adviser Standards and Ethics Authority maps out the precise requirements for financial planners – including the specific degree requirements and the content of the national exam – the hope is that financial planning will attract such individuals.
However, Breakey makes the point that it will take some time for financial advice to develop the characteristics of more established professions in society.
“For lawyers and doctors, there are stories and identities out there,” he says. “It’s hard to see that financial advisers have that tradition.”
Whether that will prevent individuals from joining the profession or not, he says, is difficult to say.

The chicken or the egg?

As the fledgling financial planning profession works to shed the image of an industry that oscillates from one institutional crisis to another, it is natural for both existing planners and incoming planners to pose the following question: Is it the institution that fosters unethical behaviour or the individual?
Breakey, whose background is in moral philosophy, says it’s possible for individuals to be conditioned by their environment, which strengthens the case for addressing institutional crises at the root. Put another way, a planner could make the wrong decisions, without necessarily being a ‘bad’ person, if the culture enables it.
On the other hand, “Can you manage to get through as a professional if you don’t have good moral reasoning? You probably can if the institution around you is a really good one,” he says.
The Ethics Centre’s Whitaker says an organisation’s culture has an impact on both employees and clients that is measurable.
“Our view is that culture can be measured,” she says.
Whitaker has been tasked with ethics audits that have examined various parts of cultures that can affect behaviour. Questions from the audits include: Does the code of conduct guide certain behaviours? Does the remuneration structure direct you to act in line with the values of the organisation?
She explains that culture within a small or large planning firm can be reformed if there is a genuine desire and commitment from management. The Ethics Centre went through the process with the Australian Olympic Committee, which adopted all of the centre’s recommendations over three
to four months.
In terms of how organisations measure their culture, she says there’s an over-reliance on tools like staff surveys as barometers for whether employees are satisfied or feeling the sort of pressure that can influence behaviour.
Etiam’s Mulcare has advice for principals who want to encourage planners to come to conclusions that will benefit both clients and the business: bring as many perspectives into the conversation as possible, whether they’re from the chief executive or the receptionist.
“Don’t make poor decisions through lack of thought,” he says.