Ethics - a priceless asset

The success of an independent advisory business depends on client relationships. Therefore it is imperative to build and maintain an ethical culture.

Strong client relationships offer advantages. Nurturing long-term client relationships will help a business to grow, especially when word of mouth and reputation count significantly. Solid client relationships can also help reduce perception of risk in a business, decrease costs and losses, and increase client loyalty and retention.

Satisfied clients form strong relationships. From a client’s perspective, factors that influence satisfaction include: trust; longevity of the relationship; expertise on offer; and, above all, visible business ethics.

The concept of ethics is twofold, according to the CFA Institute. Firstly, it refers to the accepted standards of right and wrong that prescribe what people ought to do. This is usually expressed in terms of rights, obligations and benefits to society, as well as fairness, and virtues, like honesty, compassion and loyalty.

Secondly, ethics refers to the study of one’s own moral beliefs, moral conduct, and striving to ensure that individuals and institutions live up to reasonable and solidly-based standards.

Ethics is not feelings. Feelings provide information that may inform ethical choices, but they are separate and distinct from the concept of ethics.

Ethics is not blindly following the law. A good system of law incorporates ethical standards. However, the law may deviate from what is ethical. The concept of ethics is fluid and constantly adapts to meet social standards and test existing social norms.

Ethics is not culturally accepted norms. While some cultures are largely ethical, others may be corrupt or blind to certain ethical concerns.

Ethics is also not a science. Social and natural sciences can provide important information to help people make better ethical choices, but on its own science cannot tell us what we ought to do. It may explain certain human behaviour and traits, whereas ethics justifies how people ought to act.

For the success of a business, it is vital to abide by a code of ethics, also known as a code of conduct. A code guides and informs business actions and decisions in the context of industry norms and established standards. In turn, this influences how staff members within the business operate.

A business may anchor itself to its own code of ethics or an association’s code. Masthead advisors, for instance, are expected to adhere to Masthead’s code of conduct.

A typical code of ethics includes a pledge to:

- protect the financial interests of clients;

- treat clients with respect, and information with confidentiality;

- conduct business with transparency;

- conduct a needs analysis before recommending any products or service;

- have full knowledge of, and competence in, the products and services the business offers; - disclose and manage conflicts of interest.

By adopting tailor-made rules and properly integrating these into daily operations, a business will create a strong ethical basis, and significantly reduce the risks posed to that business.

An ethical advisory business would be able to show its clients that a high ethical standard is maintained, and that the clients can trust that their advisor will always act in their best interests, whether it benefits the advisory practice or not. This is something clients will come to value – and this is a priceless asset to a business.

This may also be the message that will spread to potential clients, turning ethics into real business growth.

Today’s client requests are tomorrow’s client demands. If you help your clients with what they need, they will come back to you with what they want.

Doing what you can to meet a client’s timeline, requirements and expectations in an enthusiastic and ethical manner builds trust. When trust exists, relationships flourish and a business’s bottom line consequently benefits.