Steven R. McCarty
LifeHealthPro.com/author/steven-mccarty BEST PRACTICE
Attaining success in the financial services industry depends on perform- ing at your best — optimal level — in
every facet of your business. Sadly, too many
advisors offer less than their best, perhaps
succumbing to America’s pleasure- and
The temptation to settle also is evident in
how advisors handle ethics and compliance
issues on the job. I often observe individuals
who are highly principled (i.e., ethical) but
drop the ball when it comes to following the
rules (compliance-focused). Others understand the importance of rules, but don’t apply
ethical principles when compliance mandates
In short, to become a top-tier professional,
you must not only be highly ethical, but also
highly compliant in terms of adhering to the
law. At first blush, these two elements appear
to be at odds. But as the Chinese have taught
us, opposing forces are usually complementary — part of a unified duality called “yin and
yang.” As that iconic black-and-white symbol
suggests, ethics and compliance are both essential to your success; doing one without the
other is a guarantee of mediocrity — or worse.
So here’s the practical application. If your
heart is in the right place, but you shrug off
rules, you leave yourself open to external
attack (from customers, competitors and
regulators). But if you prioritize compliance
over ethics, you leave yourself open to attacks
from within (from your own greed, envy, etc.).
Finding the right balance between these two
elements is difficult, but essential. The following two examples should make this more clear.
An advisor served an older couple for 15
years, and he often signed forms on their
behalf in order to simplify their lives. This con-
tinued without incident until one day, he saw
a request to transfer funds to an outside in-
stitution. Thinking it a mistake, he signed and
submitted a form on their behalf to cancel the
request. However, the couple had initiated a
relationship with another advisor and actually
wanted the money to buy a product from that
agent. Nonplussed, the couple filed a regulator
complaint against the advisor, resulting in a
$12,000 fine and six-month work suspension.
Lesson: the advisor’s action came from a place
of kindness — he was trying to protect his
clients — but he broke an important compliance rule: never initiate an action for a client
without the person’s written permission.
The second case involves an advisor who
did in-depth fact-finding around a couple’s
retirement-income needs. After completing
his analysis, he suggested they buy a high-commission product even though less expensive options were available. Operating under
a suitability standard, the advisor believed
he was justified in recommending the more
expensive contract. However, from an ethical
perspective, he put his own self-interest above
the good of his client. Lesson: the advisor’s
bias toward compliance led him to violate a
key ethical precept, opening the door to
further ethical lapses in the future.
So how should you integrate ethics
AND compliance in your own business?
Consider these pointers:
• At every juncture, ask two questions: “Is it
legal?” and “Is it right?” These are two distinct
questions, and the answer to one does not
necessarily apply to the other.
• View compliant actions as the minimally
acceptable standard and ethical actions as
the “value-added” best practice. Highly
successful advisors always go the extra mile
to do what’s right for their clients.
• Finally, always remember that being ethical
doesn’t prevent blowback when you break
the rules. Advisors who combine an ethical
yin with a compliance yang will always have
the most sustainable and rewarding careers
in this industry. Will that be you? RA
Are you practicing with
a yin/yang approach to
Go to this article on
to start a discussion
with other advisors.