2 years ago

Blue Chip Issue 78 - Jan 2021

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ETHICS How conflicted

ETHICS How conflicted are professional FINANCIAL PLANNERS? Appreciating the psychological factors that lie behind conflicts of interest When asked, financial planners believe they are objective and impartial during the advice-giving process and are seldom aware of how frequently their self-interests conflict with acting in the best interests of their clients. However, literature and research on the psychology of conflicts of interest (COIs) highlight that we are regularly conflicted in our daily activities and our brains need to work hard to avoid conflicts that may negatively impact on the interests of others. Most financial planners tend to think of COIs in terms of the disclosure requirements found in the FAIS General Code of Conduct and the FPI Code of Ethics and Professional Standards. However, many planners do not fully appreciate the underlying psychological factors behind COIs that are often subtle but hugely influential on their attitude and decision-making, as well as the awareness necessary to minimise the negative effects of giving clients biased advice. COIs fall within the realm of moral standards and decision-making and are loosely defined as a clash between the proper exercise of professional judgement and personal A conflict only becomes unethical when it negatively influences the professional judgement of a financial planner and damages the interests of a client. 62

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