Financial Advisors: Are You Ethically Advising?

It’s noisy out there, that’s for sure. But we all need to do a quick check to make sure that our core values do not waver with all the noise that can be thrown at us throughout our lifetimes. Having strong character requires having ethics, of course. We should not just throw around phrases such as “ethically speaking” if we can’t back up the premise with our values and our actions.

Socially Responsible Investing (SRI), known as ethical and green investing, is popular currently in the financial services industry. Of course this means avoiding industries that negatively affect the environment and its people. But working in the financial services industry many years, I view SRI and ESG (environmental, social and governance) as just a sales pitch to investors based on their emotions – which is completely opposite of what I learned about managing behavior and helping clients in managing their emotions when I was a practicing financial advisor and wealth manager.

When one is charged with the task of being a fiduciary, it always requires acting in the client’s best interest. It does not coincide with selling or creating investments for clients specifically relying on the client’s ego, fear or greed.

Most competent advisors have had some training on behavioral investing or have seen writings on its value. We have heard the adage of “Buyer Beware” but what stuns me the most is how quickly clients can lose sight of what they want to achieve. They are attracted to investments because of the sales pitch, whether or not it is part of a strategy for their benefit.

Investors need to be alert and think through the important question: “Is this for my benefit or for the seller’s gain?”

If the solution is in the best interest of the client but they are not buying into the recommendation, there may be a story presented as to why this product is the newest and greatest for the client, at least until the next one is created. There are only a few investor personalities.

Unfortunately, within our industry as well as other industries we have some financial advisors (salespeople) that will know how to understand these dispositions and will persuade investors to act on their emotions.

If you haven’t studied behaviors, you may want to review the DALBAR Investor Behavior Study.

For financial professionals, the primary question to always be asking yourself is this: “Am I selling or am I ethically advising?”


Sandra Nesbit

Mainsail Capital Group


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