Why best practices put ethics first

Commentary March 30, 2016 at 12:47 PM
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Self-improvement is the mantra of modernity. People want to look better, feel better, have greater resources and be happier. They want to become the best version of themselves as quickly and with as little effort as possible.

The pursuit of physical fitness is a case in point. People visit personal trainers wanting to build stamina, sculpt more attractive arms or legs, lose weight or gain strength. Validating those goals, trainers also remind their clients of the importance of working on their core — the muscles around their trunk and pelvis. Why? Because the stronger and more flexible those muscles are, the more effective and efficient other areas of the body will be.

Why discuss core muscles in a business ethics column? Because as I've observed this industry during my 10 years as a columnist, I've seen how easy it is for advisors to get distracted from the core values and ethical practices that produce long-term success. They focus on seeing more prospects, closing more sales, cross-selling more products, racking up more conference credits, graduating to a nicer office, buying a more luxurious home, etc. There's nothing wrong with wanting those things. But remember, they are results, not root causes. The core exercise of ensuring you're in this business for the right reasons — and of treating your clients the right way — are infinitely more important.

Because when all is said and done, success in this industry isn't about executing sales and marketing tactics. It's about something more strategic and more fundamental: how much you care about the people you serve, how committed you are to their welfare and how effectively you build trust so clients feel safe to make the decisions required to attain retirement security.

In short, the best practices in our industry — the entities, not the actions — will always be the most ethical firms. But this doesn't just happen by itself. It results from focus, commitment, execution, and refinement over many years. For example, in my view, an advisor creates a "best practice" by:

    • Knowing his core values; in other words, knowing what he stands for.
    • Committing those values to writing and living by them each day.
    • Devising an ethics code and sharing it with staff.
    • Knowing the difference between ethics and compliance.
    • Adopting ethical solicitation, suitability and customer service practices.
    • Recruiting, training and rewarding an ethical staff.
    • Successfully dealing with temptations that arise from within (conflicts of interest, the four classic temptations, and compensation-related issues).
    • Successfully addressing detractors that arise from without (dishonest prospects/clients, people who try to "own" you).
    • Staying ethically sharp by learning from mistakes and committing to self-improvement.
    • Giving back by making a difference in the community and industry.
    • Developing an exit strategy that treats all stakeholders responsibly.

Just as exercising the body's core makes one more fit, these core ethical practices will make your business stronger and give you more stamina to deal with the stresses of running it. They will make you more flexible to react to changing business conditions and the market volatility that comes with being a financial advisor. And they will make your tactical marketing and sales more productive, just as strong core muscles enable one's shoulders or legs to excel at tennis or mountain biking.

I feel so strongly about how ethical business practices cut to the core of business success that I will be discussing it in-depth in the months ahead. I hope you're up for the exercise of becoming the best practice you can possibly be.

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