Business owners, executives, and other professionals rely on financial planners to help them make strategic financial decisions to further their business goals and build individual wealth. But financial planners have their own obligations to their companies and their own bottom lines. This can create a conflict of interest that makes it harder for financial planners to do their jobs, and their clients to rely on their recommendations. As a financial planner, it is important to remember that your moral obligation supersedes your professional expectations.
Financial Planners’ Professional Values Include Business Success
There is a reason you went into financial planning. Maybe you enjoy helping others, or seeing people meet their goals. Perhaps you are skilled at understanding financial data or creating strategic and financial plans. When you put your values as a financial planner at the center of your work, your career can be personally satisfying and professionally beneficial. But doing so requires you to keep your focus on the moral obligation to your clients.
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Fiduciary Duties Make Morality Your Legal Obligation
As a financial planner, you are a fiduciary for the benefit of your clients. That means you have legal duties of care and loyalty to your clients. Essentially, federal fiduciary laws require financial planners to put morality over their own business or personal interests. This means you can’t legally:
- Act in bad faith
- Take advantage of your clients
- Violate your professional ethics
- Neglect professional standards of care
- Be dishonest or keep information from your client
- Withhold accounting or reports
- Working in situations that create conflicts of interest
- Failing to disclose your own interests in the relationship (such as commissions or profits)
- Putting your own interests first.
Instead, fiduciary advisors of all types are required to serve their clients by reviewing all available information and doing reasonable investigations before making recommendations based on those facts. This is the “duty of care.” You are also required to be loyal to your clients, and make recommendations based on their needs and priorities, not your own best interests. This is the “duty of loyalty.”
Advising Professional Clients Means Putting Their Needs First
When advising business owners about their company finances or individual investments, being a fiduciary means you have a moral obligation to act in your clients’ best interest, rather than your own or your company’s. All too often, fiduciaries who work for insurance providers or financial management companies have sales goals or financial expectations handed down from management above them. As a financial planner, you could face pressure to encourage certain investment strategies, or consolidate your clients’ financial interests under the umbrella of your company’s offerings.
However, a financial planner’s duty of loyalty puts your clients’ needs above your managers’ expectations. That means if your client’s business priorities or individual investment goals are better served by another strategy (or even a competitor’s offerings), you have a legal duty to provide that information as part of your recommendation. Your moral obligation to serve your clients’ interest must supersede those professional expectations coming from higher up your company’s organizational chart.
Financial Planners Shouldn’t Be Putting Profits First
One of the biggest conflict of interests a financial planner faces is putting their own financial incentives aside to focus on their clients’ needs. Commissions, sales, bonuses, and other financial incentives are all tools that financial companies use to motivate financial planners to do their work better, and make the company more money. Depending on the structure of the company, and its commitment to individual planners’ fiduciary obligations, it can pit employees’ financial incentives against the clients’ best interests. But financial planners shouldn’t be putting profits first.
Instead, your moral obligation, and fiduciary duty, requires you to base your recommendations on your clients’ goals and priorities. You should be carefully reviewing their financial records, and the service offerings reasonably available, and then making recommendations that will help those business owners and individuals achieve their goals. By ensuring your moral obligations supersede your professional expectations and financial interests, you can keep the heart in your practice and do your best work for your clients.
David Stanislaw is an organizational development specialist with over 25 years’ experience in improving processes in the workplace. Through business consulting and facilitation, David helps businesses make good use of financial planners and other fiduciaries. Contact us to meet with David to move toward high organizational functioning today.
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