Ethical financial advice is not your responsibility, it's my right
You may not think it, but we all invest ethically.
I'm not talking about tree-hugging hippies telling you to avoid companies like Whitehaven Coal Ltd (ASX: WHC) because fossil fuels are destroying the Great Barrier Reef — although, that would be a great idea, in my opinion.
I'm talking about the rights of Australians to get fair and transparent financial advice and products.
An advisor or financial services licence holder does not need to sit down with their finger paint and scratch out a 200-page code of ethics to be 'ethical'.
It's simple. Put your clients, subscribers, investors and readers first. To coin one of Lara Bingle's infamous phrases, it's that 'bloody' easy.
ASIC, the financial services watchdog, can approve 'codes of standards' for finance companies in different areas. And, from July 1 2016, every single financial advisor is required to subscribe to a code of ethics.
They are not long documents.
In fact, being so short and succinct makes them far more powerful.
In a nutshell, which is where all the best things in life can be found, it says to put your client first. Do the right thing by them.
So what does that mean?
If you have to ask, you shouldn't be in finance.
But, let me show you how it can be a little more subtle and disturbing…
A boss says, "process this term deposit for Mr and Mrs Jones".
It's a good term deposit and according to the law it suits their financial situation, so it ticks the regulatory box. But you know for a fact that there is an even better term deposit. It costs less and it comes from a competitor, so you and your company make less money. That's unethical.
Let's imagine again you read a blog post from your favourite investor. They talk up a stock that they invested in. For example, let's say they tell you everything you want to know about National Australia Bank Ltd. (ASX: NAB) shares but leave out the fact that it has approached their fair value target (what they think the shares are worth). That's totally unethical.
The reason advertisers and marketers tell you what you want to know or what you already know is because it makes you feel smart. We are much more likely to trust someone we agree with.
It's a classic finan… pardon me, sales gimmick.
That's the subtle version.
But it also includes online advertising. I bet you have seen those pictures of people with huge smiles holding wads of cash with a statement like 'you can too'. Those are unethical because even though they hide behind the 'oh, it's just marketing' excuse, it's misleading.
And even if an advice giver truly believes he or she is doing the right thing by their client, it can still be unethical. Remember, the road to hell is paved with good intentions.
Foolish Takeaway
Ethics are vital to the finance industry. From financial advisors and fund managers through to mortgage brokers, banks and online advisors, no one can ignore it. If you are a client or customer of one of these services demand to see the company's code of ethics or the industry code of ethics they comply with.
Remember, ethical financial advice is your right.
