The Ethics of Financial Advisory: What’s Behind the Curtain?

It’s foolish to expect that someone else is going to care about your money more than you do, so rather than blindly trust a so-called expert to handle your wealth – make sure you understand what’s really going on behind the scenes.

Ethical Challenges in Wealth Advisory
Ethics are a challenge in many professions, but especially in the wealth advisory and investment industry where many advisors are paid on a commissioned basis. While an advisor typically owes you a fiduciary duty when they take you on as a client, their personal interests always play a role to some degree. For example:

– Investment advisors may get paid more on one product vs another
– Investment advisors may receive commissions for buy/sell transactions
– Mortgage brokers may get different commissions on different products
– Lawyers and accountants may have incentive to drag out work to create billable hours

This is not to say that all professionals do this, but there is always an underlying consideration of self-interest for any human being. These ethical challenges are nothing new, and have always been behind the curtain of the investment industry. For example Fred Schwed Jr.’s “Where Are the Customers’ Yachts?” was published back in 1940 and takes a closer look behind the scenes of the Wall Street machine.

Professional Organization Ethics
Most professional organizations or associations have their own code of ethics (think medical, legal, accounting, etc.) and from personal experience I can attest that many of professional exams are heavily weighted towards this topic. Just as when selecting any other professional on your wealth advisory team, it makes sense to select a financial planner who is part of a professional organization with a recognized designation such as:

– Personal Financial Planner (PFP)
– Certified Financial Planner (CFP)

Professionals with these designations must adhere to the PFP Code of Ethics or CFP Standards of Professional Conduct in addition to hours of study, practice and exams to become experts in their craft. These codes and standards outline topics such as:

– Putting the client first
– Integrity, objectivity, fairness, and competence
– Confidentiality, diligence, and professionalism
– Responsibilities (general, to the client, and to the profession)

Finding Trustworthy Professionals for Your Team
Taking some time to think thru potential conflicts of interest between yourself and your advisor means you can approach your wealth planning with an “eyes wide open” view. Next, here are a few tips on how to find trustworthy professionals for your wealth planning team.

#1 – Work with Professionals
First, work with professionals – meaning people who have the education and credentials to serve you best. These people are governed by a professional association and are most likely to be able to serve you best.

#2 – Look for Transparency
Second, look for professionals who are willing to be transparent with you. When you have an initial conversation they shouldn’t shy away from any of your questions about compensation or track record. They should be willing and able to provide full disclosure at all times.

#3 – Track Record
Third, look for a competent professional with a track record of success. Past success is important for 2 reasons – it gives you some comfort level around expected results, and it’s easier for a successful advisor to put your interests first than it is for someone struggling to put food on the table for their family.

#4 Pay Attention & Trust Your Gut
Lastly, pay attention throughout the process and trust your gut. Again, it’s foolish to think someone else is going to care about your money or success more than you. There are advisors who absolutely put their clients first and realize that their success is determined by the success of their clients. Seek out these people for your team and trust your gut!

No mortgage or financial planning team in this country does more borrowing to invest or borrowing for wealth creation than our team. We have the business track record and formal education to support your plan and to help you achieve your financial goals. Volatile markets create opportunities and we would love the opportunity to help you capitalize. Call our office today to discuss how we can help at 1-855-410-9905 or email

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