Ethics in Financial Planning

Ethics in Financial Planning

Ethics in Financial Planning

Code of Ethics

When you enter the premises of any company, you will find some displays which have the words, ‘Code of Ethics’ proudly conveying the practices followed in the company.Do you know why many companies display the ‘Code of Ethics’?

Code of ethics is something that builds trust in a person. It gets in him the confidence while dealing with others. Code of ethics defines the acceptable behaviour and also promotes high standards of practice.

Do we, as individuals too have code of ethics?Code of ethics means certain general standards followed uniformly by all professionals engaged in the same profession. However, one must know the difference between code of ethics and code of conduct. The former are certain standards which have to be voluntarily followed by the members of theprofessional body and the latter are enforceable rules.In short, code of ethics should be followed voluntarily by a professional in the interest of himself and his client.

Code of ethics is needed:

1. As a tool of professional maturity and identity

2. As a framework for professional responsibilities

3. To define an acceptable behavior amongst professionals

There are certain codes of ethics that are laid by the Financial Planning Standards Board (FPSB), India, which we will deal with in the later parts of this unit

Investment Ethics

It is a must on the part of the financial planner to maintain certain code of ethics. It is also important for him to take care of the investment ethics as well.

We all know that every relationship manager (RM)/financial planner has certain targets to be fulfilled by the end of month/quarter/year. Most of the times, RMs and financial planners, do so by getting the client to invest into those financial planning products, the targets of whose is yet to be met with.It is the responsibility of the financial planner to suggest and invest in only those investments which are actually beneficial for the client. Ethics in financial planning makes an investor happy. A happy investor means more business for the company.

Compliance Angle in Financial Planning

We have discussed the various components of financial planning in previous units. Financial planning involves: Banking, such as, managing savings bank account, fixed deposit and so on Investments in mutual funds, stocks, bondsInsurance plans such as, traditional and Unit Linked Investment Policies (ULIPs)One should remember that each of these organisations is governed by certain regulatory bodies. These regulatory bodies too have certain set of rules and regulations that one has to adhere to. This legal framework is what is known as compliance. The compliance angle in financial planning involves adherence to the procedures of investment, following the guidelines. It also involves complying with the certification requirements as applicable to the financial planner.

Code of Ethics of Integrity

Members shall not give false or misleading advertisement about the size, scope and areas of competence in financial planning of their organisation.

Giving misleading information is not just distrust for the customer, but also a matter of shame for the bank. This will only get the bank a bad reputation.

Members shall not make any false statements and indulge in an act of dishonesty, deceit or fraud.

Code of Ethics of Objectivity, Code of Ethics of Competence, Code of Ethics of Fairness, these are important for companies ethics .

An ethical approach to financial planning is a must. Adherence to the rules and regulations, systematic and ethical approach to serve the financial planning needs of the client is crux of customer satisfaction and delight.






























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