Ethics: Personal Fundamentals

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Fairness in Action Conflict of Interest Disclosure Agents must be sure to disclose any conflicts of interest to their clients. The same goes for any compensation arrangement, including the agent's compensation from his or her employer; as well as any additional compensation arrangements above and beyond those prearranged between any partners or co-owners where those affiliations exist. What about planners who are employees as opposed to being independent? Their employers have overall business objectives that need to be met in order to maintain the viability of their organizations. Objectives of the Employer A professional must be aware of their employer's objectives and perform at a level to deliver their part of the organization's objectives. However, this must only be performed to the extent that those objectives are within the law as well as being consistent with the agent's personal code of ethics. In most cases, employers have the same need and desire for their employees to be highly regarded as ethical individuals while also maintaining their professionalism and record of ethical conduct at all levels across the organization. Compensation Disclosure In fairness, the issue of compensation needs to be communicated clearly and with enough detail to make sure the client has a full knowledge of what it will cost to have the benefit of the agent's services, if a fee is charged. Compensation should be fair and reasonable. It should be relative to the financial planning services to be performed. And, any additional costs associated should be disclosed, especially if they also require that the agent implement the plans at a given time and/or over a predetermined timeline if the implementation takes a longer course. How does the agent address the amount of time that an initial compensation arrangement and disclosure to the client should be performed? It should be initially offered for a year period and reviewed at least annually. If the client requests an update or re-negotiation of the compensation arrangement in any way, the agent should allow for it and provide an amended or adjusted schedule as appropriate and as agreed upon by both the agent and the client. In many cases, the situation surrounding the financial arrangement and implementation may require that the compensation disclosure be in terms of a percentage, approximate dollar amount, or as a range of dollar amounts, etc. The more detail, the better it is for avoiding confusion and unintentional surprises perceived by the client, after the fact. If the agent finds it necessary to estimate costs and compensation because of the open ended nature that a situation initially requires, these should be communicated clearly along with a clear overview of the basis for any assumptions used in the disclosure. And, of course, there is always room for recalculating and re-communicating any changes to the client should the situation change substantially from what was mutually derived, assumed, and agreed upon at the outset. If the agent's initial disclosure assumed that there might be unanticipated situations that could alter the financial engagement in the future, it would be best to have that as part of the compensation disclosure initially and agreed upon up front. In addition, the agent has the obligation to disclose supplemental compensation arrangements, if any, to his or her clients, employers, and to any other business affiliations such as partners, co-owners, etc. Well Informed Clients Further, it is up to the agent to make sure that he or she keeps the client informed as to their employment status with any employer, any change to their professional and licensure status; and any arrangements outside their employer, if applicable, that could impact the capacity for the agent to perform at levels expected by the employer and in a manner consistent with an employer's organizational standards and objectives. Impartiality & Honesty Fairness dictates that the agent act with honesty and impartiality in addition to maintaining an open relationship with client disclosure. Fairness requires impartiality, honesty and disclosure of conflict(s) of interest. This speaks to fairness, even to the extent that it requires a subordination of one's own feelings, prejudices, and desires. This allows a financial professional to achieve a proper balance of conflicting interests. Fairness dictates that financial professionals disclose things that are relevant to the relationship established with the client. While these items are in most cases obvious and fundamental, they are critical to a professional, ethical, and longer-term relationship with the client. As you would expect, they include address, business affiliations, professional credentials, licenses held, employer/agency relationships, basic compensation structure, background and qualifications pertinent to the services that the agent is expected to perform for the client, i.e. philosophy, resume, etc. Agents should also make it known - up front - to their clients (or prospective clients) that they are welcome and encouraged to ask anything they want, on any level of detail, what they would like in relation to compensation at any time.

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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.