Ethics: Personal Fundamentals

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Applying Knowledge and Experience Knowledge and Experience at Work Competence is not a high standard per se. It is a standard that is fashioned by the degree of difficulty. An estate plan will have a higher degree of difficulty than a college education plan. As such, in each case, competency is viewed based on the agent's experience and knowledge. Of course, no one likes to hear that experience is necessary, especially if the person is trying to enter a new line of business or a new career. But, the premise is true. With experience comes the wisdom of how best to apply the knowledge acquired. It has often been said that the best teacher is time itself. In other words, regardless of the knowledge obtained (from books, classes, lectures, or seminars) nothing can substitute for actual experience. In dealing with clients, the agent must not only be well versed in the subject matter (e.g. retirement planning), but must also have some experience with the subject. This does not mean that an agent can never work with a client in a new area. Otherwise, it ends up being a case of "the chicken or the egg". (How can an agent get experience unless they practice, but how can they practice without the experience?) Without the knowledge, the agent would have no idea how to go about providing a solution. But a lack of experience may only slow the process, or not be as smooth in exercising the solution. As long as the agent has provided informed consent, i.e. the agent has been forthright in explaining his or her current level of experience in the area, and the client has not been led to expect a higher level of skill, there is no breach of the agent's ethical obligation. Continuing Education As the trusted competent adviser, the agent is expected (unless the relationship has been agreed otherwise) to provide ongoing service and support to the client. The duty to remain informed, as the agent, covers several areas - client information, relevant market information, tax information, and professional development. This includes keeping current in regards to the client's financial affairs, as well as keeping the client's current on issues that may affect their financial plans. Client Tax Issues Information Tax planning is critical in most financial plans, whether for an estate plan, retirement plan, or general financial plan. While the agent is not expected to provide tax advice (unless the agent is qualified), the agent is expected to remain current on tax issues that may affect the client's plans. Current Market Data If an agent's client invests in securities or purchases insurance products, it will be necessary for the agent to keep him or herself, as well as the client, current on any changes. The objective is for the agent to recognize whether the client has a potential problem, or if a client's goal has been obtained. Client's Information A financial plan is only as good as the information and assumptions upon which it is based. Over time the client's status, expectations, and goals will change. Therefore, the agent must strive to remain informed of any change in the client's financial status as well as other changes. This does not imply that the agent must be in constant contact with the client. However, the agent may want to contact his or her clients quarterly, or at least annually. Professional Development Professional development covers two areas: increasing knowledge and improving public perception. Obviously, increasing personal knowledge will increase competency and lay the foundation for a growing and successful business. By continuing professional development, the public perception of the agent, their practice, and the industry as a whole grows stronger. While the public perception may not provide immediate benefits to the agent, over the long term all agents' practices will see the benefits of a public that appreciates the high level of service and advice the industry provides. Objectivity Objectivity is the state or quality of being objective, such as when one tries to maintain objectivity in his or her decisions. It also relates to intentness on objects external to the mind and external reality. All people come from different backgrounds, attended different schools, have different family histories with different backgrounds, different personal life and financial experiences, different personalities, different philosophies on saving and investing, and varying approaches to providing services to our clients. Objectivity, generally speaking, is seen in someone who is uninfluenced by emotion or personal bias. Agents must be intellectually honest and impartial in providing objective advice and recommendations to their clients. We are all different, have different preferences and ways of going about things, and ways we process information to make decisions. This is also true for each of the individuals for whom we provide services and with whom we do business. People have a favorite baseball team, a favorite make of car, a preferred news program and TV channels. In most cases they have made a predetermined decision that their choice is better than the choices of others that do not have the same preferences as they do. So is it also true that financial planners may have their own preferences, methods, strategies, etc. that they have incorporated personally over a period of time. What happens when a client is unwilling to accept more risk to meet their retirement financial goals even though they are young and have plenty of time to their retirement? Objectivity requires that we be willing to set aside our own priorities, preferences, and personalities to allow us to be impartial and maintain intellectual honesty when approaching our work with clients, as well as protecting the integrity of our work. In the evaluation and recommendation phases for a client, outside influences that are not directly in the best interest of the client need to be avoided. When an agent's personal biases or preferences are not consistent with the client's, the agent must be able to put theirs aside to make sure they are able to see things from their client's perspective. It is imperative that the agent takes action on behalf of their client's benefit, perspective, and way of thinking. When working with a client, the agent should exercise reasonable and prudent professional judgment. Providing professional services implies, to the client, that the agent is, in fact, acting in their best interest. As such, it is imperative that the agent maintains impartiality in making recommendations or in providing advice to the client. In exercising reasonable and prudent judgment, the agent may rely on his or her experience, knowledge, and education to determine an appropriate course of action. Again, prudent judgment does not imply perfect judgment. The agent's judgment does not have to be flawless; it must simply be reasonable in light of the facts and the circumstances. Prudent is viewed from the eyes of the industry as a whole, given the facts and the circumstances. If a person with similar knowledge, experience, and education would have acted in a similar fashion, then the agent has acted in a prudent fashion. A good way to determine if a particular course of action is prudent or reasonable is for people to ask themselves whether they would make the same recommendation to themselves. While this is by no means a definitive test, it will help each person to refocus on the interests of their client.

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Not only are policy forms, clauses, rules and court decisions constantly changing, but forms vary from company to company and state to state. This material is intended as a general guideline and might not apply to a specific situation. The authors, LunchTimeCE, Inc., CEfreedom, and InsuranceEthics101.com, and any organization for whom this course is administered will have neither liability nor responsibility to any person or entity with respect to any loss or damage alleged to be caused directly or indirectly as a result of information contained in this course.