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Being Ethical
By Peace | December 30, 2006
There are just too many temptations and evils in this world. Money is something which is needed for survival, and yet it is also something which can lead to a lot of harm and evil doings in this world. When face with temptations, it takes a strong-will and discern person who knows what is right and what is wrong, in addition to a kind heart who is able to sympathise and empathise with people, to concur temptations.
Speaking of Financial Services, can be quite irritating when I think of how these people, the Financial Advisers act unethically have their own monetary gains over the ‘loss’ of ignorant commoners in the market.
Helium is paying people to write articles. The amount is so little! I have written quite a number of articles so far and I have yet to earn even $2.00! The minimum payout for Helium is $25. However, I am still writing because of interest. Money is not everything. Though we need money, however, sometimes we need to do things that our conscience is clear. We cannot do things that we can have more gains, knowing that the others have not benefited from doing so. If we explain clearly to our customers the pros and cons, the terms and conditions of getting something, then if the customers still insist upon something (which is beneficial to us, but non-beneficial to them), then at least our conscience is clear. However, a professional Financial Adviser, should always do a proper financial needs analysis and see what is appropriate for the prospects.
This is another article which I have just written at Helium:
Assessing the ethics in rewarding financial advisors
Ethics means a set of principles of right conduct. Ethics deal with the moral principles of an individual. It is a set of values relating to the human conduct, with respect to what is right and what is wrong.
In sales job, such as financial advisors (insurance agents) and property agents, there are a set of code of conduct and ethics to follow and adhere to. Financial advisors are people who earn a living by helping their customers/clients in financial planning. In the past, people who sell insurance are called insurance agents. Nowadays, insurance agents are being addressed more professionally as Financial Advisors. They no longer sell merely just insurance policies alone. They have to take a lot of exams and according to what qualifications and certification they have, they are able to sell investment products such as bonds and unit trusts, in addition to their normal range of insurance products.
Financial advisors can have three types:
1. Financial advisors working as associates under a company, getting paid solely based on their performance basis. These advisors represent their company in selling the company’s products and get paid through commissions basis (depending on the size of the amount of investment and types of products ).
2. Financial advisors working as salaried workers in a company. They have a fixed pay job. They have targets to meet, beyond which they earn extra bonuses. These people mostly work for the banks.
3. Independent Financial Advisors who act as brokers. They are paid according to what they sell, very similar to the first type of financial advisors. They earn their living surviving based on the commissions they earn from their products sold. Some others choose to charge their customers based on a fixed sum of money, something like service charge — just like when you consult a doctor, you need to pay consultancy fee. Independent Financial Advisors are different from the first type of Financial Advisors in that they can represent a number of companies. This means that their products are more diversified, not restricting to just a company alone. So when it comes to advising you on products, they might offer you more options.
Nowadays, Financial advisors can cover people like property agents as well. It is a term used to describe people who advices monetary matters. Property agents are also paid very similar to insurance agents, however I have not heard of Independent Property Agents yet. So both insurance and property agents can be paid based on salary or commission basis.
I find that it is very unfair to Financial Advisers who work for the company and being paid solely on commission basis only. Sales is a follow-up business. Just like you start a fire, the initial initiation of fire you see no results, but it is critical for the fire to start ultimately. In addition, meeting clients, transport allowance, all expenses have to be covered by the Financial Advisors alone. At time when the Financial Adviser is not feeling well, he/she needs to see doctor, he too have to pay for his own medical expenses. The Financial Advisers need to meet a lot of people in order to close a sale. Not all appointments will be sucessful. Sometimes, you wasted a meal treat, when the prospects only want to meet for a free meal and not seriously sincere in getting financial products or advice. Not all prospects turn up for appointments. When this happen, you wasted a trip and your time just like that! Your trip involves transportation charges which you are not able to claim from the company! You have to use your own pocket money for all these expenses and gifts to your prospects!
As you can see now that the life of a Financial Adviser is not easy, Financial Adviser will always want to think of a faster and quicker way of earning easy money. Every potential prospect who come to them is opportunities to them. They are not going to let any one slip off so easily! That’s why, a lot of Financial Adviser, especially those from the first category(mention above), though they studied the code of ethics, but it is common for these people to oversee them for the sake of meeting more sales targets and earning more commission. With the limited number of products they can offer to the clients, some products have their pros and cons, but sometimes to earn a living, they are ‘forced’ to ’sell’ their products more than giving the right advice to the prospects. And I have also witness some Financial Adviser (sometimes even those veterinarians and those successful ones where we should ‘learn’ from) who just ‘wipe off’ whatever sums of money the ignorant prospects showed to the Financial Advisers when it comes to investment. This is because, investing a bigger sum of money would mean receiving a higher amount of commission in return.
As selling investment products like unit trusts can be a quick way of earning commission, some Financial Adviser even encourage their clients to sell off their funds and then to reinvest again to earn extra commission. However, such a method is detrimental to the client. The client is losing money in the long run. This is one example of an unethical Financial Adviser. A good and ethical Financial Adviser
should always put the clients in the first place. He/She should not ‘make use’ of the clients to ‘make more money’. This is why I am not in favour of the first category of Financial Advisers.
The second category of Financial Adviser, which are mostly paid salaried worker, like the bank staff. These people, though they are paid a salary, they also want to make more money and they have targets to meet also. When face with stress like that — meeting targets, they also tend to retort to unethical tactics when they meet ignorant prospects. There are many newspaper articles about banks staff canvassing people in the bank and ‘urging’ them to invest their money. When it comes to investment, especially unit trusts, there is always risks. Money is important for old people and normally for old people we don’t recommend such high-risk instruments. However, I am very mad at a particular Bank here in Singapore, which approach my mother, ‘psycho’ her to reinvest her sum of money from fixed deposit into a unit trust instruments. She is illiterate. She does not even understand what she is unit trust. When she showed me the details then I realised what it was all about. But it was already too late.
Banks are often viewed by commoners as reputable and trustworthy. When you mention putting money in the bank, old people often regard money is the safest to be placed there. However, time has changed. Banks also want to earn money. However, not revealing the truth of unit trust and accessing/doing a proper financial analysis for prospects and just ‘urging’ them and ’selling’ them irrelevant products at their own gains are very ‘heartless’ and inhumane way of doing things. Old people need their money for old aged, for retirement. They cannot afford to lose their money. It is just so unethical to do such things to old people or even to any individual who are not aware of what they are investing in!
The last group of Independent Financial Advisers may have their own companies. Most of these people are mostly people who have gained enough experience in the Financial Advisory sector, and they wanted to set up their own companies. For the experience Financial Adviser, normally they charged a consultancy fee for the financial advice they gave you. These companies can also have their own group of Independent Financial Advisers who are paid via commission basis like the first category of Financial Advisers mentioned above. However, here at least the advisers can introduce a varieties of products to the customers.
Regardless of what kind of rewards the Financial Advisers have, code of ethics is all dependent on the Financial Advisers themselves. Even if they are paid salary basis, the Financial Advisers also act unethically at their own gains to ’sell’ their products to the consumers. Though code of ethics have been studied and learned, but there is no way anyone can stop these unethical behaviour of the Financial Advisers. It just got to take the honest and sympathetic Financial Advisers who are able to empathise with people, to be able to practice the real meaning of code of ethics. Though there are Financial Advisers who are unethical, there are also some professionals real good Financial Advisers around who always put the clients in the first place, and do their vest best to serve their clients.
When it comes to Financial Services and approaching a Financial Advisers, you just have to be careful and do your homework. For illiterate people, it’s just too bad, but as children or friends to these people, do help them and please have empathy for these people. Though earning money is crucial, but earning money through a clear conscience is even more better.
See my rankings at Helium for this article
December 30th, 2007 at 1:00 am
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