the rain reminds me of a story about an old woman who lived
on the hillside in the time of Prophet Noah, who did not
board the Ark. After the flood, she was still living there.
When asked how she had managed during the flood, she looked
at the questioner in amazement and asked what flood?
Weve been addressing the question of professionalism
and ethics over the past three weeks, and one of my readers
accosted me with the questions: Ethics? What ethics?
No doubt her experience had been an unpleasant one, and
she didnt think that ethics was something we were
guided by. But it is! Here are some of the international
Financial planning professionals have a responsibility to
the public, to clients, to colleagues, and to employers.
When a designation is awarded to the professional, there
is usually a code of ethics, administered by the board of
governors for the designation, to which the individual must
subscribe, which speaks to these responsibilities.
Commonly, the codes will address certain principles, and
these will be governed by written rules. For example, the
CFP (Certified Financial Planner) designation is guarded
by seven principles of ethics. These are the high standards
to which we must aspire.
The principles are: integrity, objectivity, competence,
fairness, confidentiality, professionalism and diligence.
These are vague terms, but the rules clearly define the
expectations of the buying public. With respect to integrity,
rule 101 says that a CFP designee shall not solicit
clients through false or misleading communications or advertisements
that create unjustified expectations in the client.
In addition, the individual cannot make misleading statements
about his own competence in the practice.
Rule 102 states that the planner shall not engage
in fraud, deceit, or knowingly make false statements
to anyone including government.
There are also rules regarding the receipt of funds from
clients. For example, there can be no commingling of funds.
This means that a financial advisor cannot mix his money
with that of the clients.
In addition, monies received by planners must be turned
over to the provider or investment company or insurer, as
soon as possible.
Areas where there are conflicts of interest must be declared.
All risks must be expressed, and all matters concerning
the client remain confidential at all times.
Of significance, too, is the requirement that planners engage
in fair and honourable competitive practices.
Clients also have the ability to play one company against
another or one agent against another, in jockeying for rates
of return, and sometimes the competitive war results in
a kind of institutionalising of an uneven
playing field, and sometimes aided and abetted by
the institutions themselves.
On the issue of diligence: that refers to the requirement
to accurately establish that there is a match between the
needs and objectives of the clients, his risk tolerance,
and the prescribed investment.
Of utmost importance is the imposition of the ideals of
truth and honour in the entire practice of financial planning.
In the story of the old woman on the hillside, it is said
that she was among the most truthful persons of her time,
whose life and property had been saved from the flood by
The buck stops with us, you and I, its the ideal of
truth! Indeed, there is an old scripture which invites us
to travel through the earth and see what was the end
of those who rejected truth.
Next week we continue with the 14 steps.
n Raziah Ahmed is a registered financial consultant.