is an old branch of philosophy, which is called ethics. It
is concerned with moral behaviour and standards. Its value
is paramount in todays marketplace. As Socrates is reported
to have said: We are discussing no small matter, but
how we ought to live.
Ethical conduct is a hallmark of professionalism in the financial
services industry. It reflects the quality of work to which
individuals put their signatures.
In fact, it is one of the four characteristics which define
the professional. The other three are: a specialised knowledge
of the industry, a threshold educational requirement, and
a sense of altruism or unselfishness.
The financial planning professional is at first honest with
himself/herself, and is then honest with all others. There
can be no compromise, no hour, no day!
The ethical individual, responds promptly to complaints, gives
honest feedback to all and does not subscribe to the art of
kiss up so commonly employed by those who what
to get ahead quickly.
The concept of ethics finds its template in basic assumptions
that cover all relationship and all transactions within the
The problem is that there is little overlap between the law
and ethics. This translates to little redress with regard
to unethical conduct because the law does not really treat
with most of the issues that relate to moral standards.
Clients therefore face a very real risk in placing their trust
in individuals, who misrepresent themselves and their companies.
In the industry, there has been some effort at codification
of a standard of conduct, but neither the Insurance Act of
1980, nor the new regulatory apparatus under the purview of
the Central Bank, have correctly addressed major ethical issues
facing the buying public.
While we have been assured that it is a work in progress,
as yet there are no real remedies, unless clients are prepared
to name persons, and appear in court.
Let me cite some specific types of unethical behaviour practised
by financial advisors.
The most common one is rebating. Rebating and similar type
offences refer to the practise of returning a portion of the
premium or commissions back to the client, in return for the
client doing business with that financial adviser. That is
Clients are often unwilling to report this because they benefit
from the transaction.
But economically, rebating is an indicator of poverty. If
a sales agent makes five sales for the month, and returns
his commissions to the five clients, how does he pay his bills,
or feed himself and his family? The rule of thumb is: if he
is defrauding, or breaking the law in any way, he will be
susceptible to defraud/break the law in others ways.
So a word to the wiseif a sales person promises to return
his commission or part of the premium, in exchange for the
business, something in the equation is wrong- everybody will
Another common unethical behaviour is the practise of bad
talking other agents, from the same company, or bad
talking other companies. Unethical individuals make
wild claims that they sit with board and they
get special rates. They also blatantly and falsely claim that
other agents have left the company, in an effort to steal
A second word to the wiserun those agents from your
A third ploy is that effort to get existing insurance policies
cancelled, under the claim that the new one is better.
A word to the wise: Insurance is somewhat like wine, the older
the policy, the more value it contains.
To be continued next week.
n Raziah Ahmed is a registered financial consultant.