What is the Formula for Success? Try E=MC(2)

On November 30, 2004 the NASD censured and fined 29 securities firms a total of $9.22 million for failing to properly disclose over 8,300 significant violations of ethical conduct that was committed by their brokers.

This report well illustrates the fact that a lack of ethics permeates the financial services industry from the top down and continues to dominate headlines.  Although the word “ethics” gets tossed around freely, those doing the tossing often aren’t entirely clear what they mean by it.  Why the confusion?  Educators, philosophers, lecturers, theologians, and lawyers have made the simple subject of ethics too complex.    So let’s define ethics and see what you can do now to avoid problems and truly succeed in your industry.

The Ethics Formula
What exactly is Ethics?  Ethics is simply the adherence to an upright Moral Code in both your personal life and your professional life. It’s easy to remember the formula:

E = MC (2)
ETHICS = MORAL CODE  ( PERSONALLY & PROFESSIONALLY)

Some companies offer ethics classes and consultants to produce thick ethics manuals that often read like tax codes, complete with loopholes and fine print.  Have no fear.  Although adhering to this moral code may not always be easy, it does not have to be complicated. 

The Josephson Institute of Ethics, a nonprofit organization that exists to improve the ethical quality of society, states it well when they say, “Ethics involves the commitment to do what is right, good and proper.  Ethics entails action; it is not just a topic to mull or debate.”

Ethics in Action
So what can you do now to distinguish yourself as an ethical advisor?

• Expose Yourself. Be completely truthful when explaining your education, business background, professional licenses and industry designations.  Refer your clients to a more specialized professional advisor such as a Certified Public Accountant (CPA) or Estate Planning Attorney if their needs are beyond your areas of expertise.

• Honestly, be Honest. Never exaggerate the realistic returns your clients may receive from your recommended investment product.  Always outline the possible risks or any other features that may negatively affect its future performance.  Demonstrate your honesty by outlining both the pros and the cons of any investment product.

• Know your Products. Do your homework and completely understand what you sell.  Know everything you can possibly know about a few products rather than superficial information about many.  Never pretend to understand something you do not know.  Offering to return with research material is a sign of strong ethics.

• Service your Clients.  Pick up the phone and communicate.  Communication leads to long-term commitment.  Follow thru on all of the extra services that you had promised during the initial sales process.  Adopt creative ways to say, “Thank you” to all of your clients on a regular basis.  Under promise, over deliver.

Financial Advisors that maintain ethics are recognized as business professionals that can be trusted, and now, more than ever, trust sells.  So remember the ethics formula.  If you do, you will enjoy lasting success.  Because it doesn’t take an Einstein to figure out that E=MC(2) also translates:

Ethics equals More Clients…too.

Published in: Senior Market Advisor Magazine - February, 2005 — SMA Website

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