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Financial Planners: With Great Authority Comes Great Responsibility

Suresh Sadagopan CFP IndiaBy Suresh Sadagopan, CFP

Every financial services company talks about trust; they talk as if their client’s trust them as an infant would trust its mother.  The trust that the child has on its parents is the ultimate trust.  The child does not question anything. It knows that mommy dear will come running, if she as much as whimpers. She will check whether her baby is hungry or has wet her pants. Once her mom takes the baby in her cozy embrace, the infant is instantly comforted. Her mom does what is needed and the child knows that she would. That is trust – implicit trust!

Great Authority

How good the world would be, if there were more of such trusting relationships!  Every fiduciary relationship is based on such trust.  A patient trusts his doctor to do the right thing for him. The doctor has a professional responsibility towards the patient, which is the essence of the hippocratic oath, taken by a doctor.  The medical profession is a very old profession and the trust between the doctor and patient is the norm and few breach that trust. The doctors have all the knowledge and the patient just does what he/she is told to. That is why doctors are to exercise this responsibility as their patients trust them to do the right thing for them.

This is not the case with many other professions – most professionals have to exercise reasonable care, but do not have a fiduciary responsibility.

While doctors take care of the physical health of a person and thereby play a very important role in the life of a person, there is another professional who plays a pivotal role by ensuring one’s financial well-being. That professional is your financial advisor, also known as a Financial Planner.

Great Responsibility

The relationship is as sacred as that of a doctor-patient relationship. A financial planner has a fiduciary responsibility and for a good reason. The decisions that a financial planner would suggest to a client, would have far reaching implications for their long-term well-being. But, how can that kind of trust develop in a new relationship like this?

In every relationship of significance, trust plays a role… like the husband –wife relationship. Two people from different backgrounds come together and decide to spend their lives together. The trust is total here. Rather, this relationship works best when the trust is 100%.

A financial advisor also has to earn the trust. There is no magic wand which will ensure that the client automatically trusts a financial planner. To begin, a client will come to a planner with a modicum of trust, based on the reviews they have heard about the planner. The trust is higher, if a client had been referred to the planner, by someone they trust. Reputation and reference can work to an extent.   Trust has to be built by consistent, reliable behavior by the financial planner.

Building Trust

Every minute thing the planner does, will build the trust – from responding on time, to sending an article or document within the timeframe promised, calling/meeting at the appointed hour etc.  Things such as conducting oneself professionally, being seen as reliable consistently, getting a reputation for doing a meticulous job of anything one undertakes, all add to the aura of a financial planner and the client’s trust builds up. It is fairly obvious that building trust takes a lot of time and effort. There is no silver bullet that would generate trust, here and now.

Ethics and Integrity

The other important ingredients for a financial planner are ethics and integrity. I have heard an interesting definition of integrity that has stayed with me – Integrity is what you do when no one is looking.  When we deal with people’s money, there is an overwhelming need to be well beyond reproach. Ethics and integrity are pillars on which a good financial planning practice is built. Every small thing we do will be noticed by a client. The positive aspect of this is that planners can do things ethically and display integrity and earn the client’s trust.

Alas, there is that serpent in the Garden of Eden, which tempts the planner to taste the forbidden apple. The lure of the lucre is such that an advisor can succumb to the idea of advising a client to go for a product that is not most suited, as it offers the best commissions or other payouts to the planner.  It may appear counter-intuitive to lose revenue and do the right thing for the client, but that is not only the right thing to do for the client, it is the right thing to do if the financial planner values their practice. Unethical behavior in one area invariably also shows up in other areas and the client will get wind of it sooner or later. After that, it will be one hell of a slippery slope for the planner.

Though the straight and narrow sometime appears all uphill, that is the right path for financial planners. That is the path which will build their practice, prestige and reputation, as well as categorize them as a valuable professional. The sooner we all internalize this, the better it is for financial planners and the profession itself.

1 comment to Financial Planners: With Great Authority Comes Great Responsibility


    excellent article! I strongly believe professional conduct and ethics are foundation of any business . on which long term success of any business build up. for initial start many tempting short cuts for instant success do make many professionals “FLEXIBLE” but it will not give creditability,goodwill ,most importantly life long relationship with client.

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