Blue Chip Issue 78 - Jan 2021

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.
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