The Power of Good Ethics

I have some good news, some bad news, and some BEST news. 
But first, the bad news. 

This decade has already seen its share of consumer fraud, elder financial abuse, investment scams, corporate scandals and “creative” accounting practices.

Now what goes around, comes around. Investors are disgusted with the lack of integrity that exists in the financial services industry today and they have spoken.  According to a recent Times/Mirror survey, the American public views financial professionals as being less ethical than most other professionals, including lawyers, and in a survey conducted by the PR firm TowersGroup, more than half of the respondents rated insurance salespeople near or at the bottom of a 1-5 scale in honesty and integrity.

To say that there has been a widespread breakdown in consumer and investor trust lately is like saying Enron lost a few points.  And according to experts like John Holcomb, associate professor of business ethics at the Daniels College of Business – “Markets won’t survive without organizations (and people) that can be trusted.

Now, the good news.

The securities and insurance industry is responding by making real efforts to rebuild trust.  Here’s how:

• The Sarbanes-Oxley Act of 2002 has forced improvements in company accounting and reporting procedures, and because of continuing scandals, more shareholders are taking an active role in the companies they own.

• Effective January 1, 2004, Senate Bill 620 (SB 620) in California has set stricter rules for soliciting annuities to seniors age 60 and older.  Tight restrictions have been placed on seminar advertising, lead marketing, and meeting in a senior’s home.  SB 620 even prohibits the sale of an annuity under certain circumstances.

• The states of Florida, Colorado, Wisconsin, Utah, Arkansas and New Jersey have adopted the NAIC Senior Protection in Annuity Transactions Model Regulation, known as the "Annuity Sales to Seniors" law.  This law sets forth minimum standards for insurers and insurance producers that make recommendations to consumers aged sixty-five years or older on transactions involving annuity products.

These days, investors, including seniors, are better informed and not easily fooled.  A recent survey revealed that more than half of all Americans age 50 and over use the internet.  Seniors that once passed the time in their rocking chairs are now rockin’ in front of a computer, logged on to any number of sites, including those that offer investment advice.  They are not impressed with “slick salespeople”, who hawk their limited product line filled with features that are not in their best interest.

The BEST news.

Some financial marketing organizations are now taking the ethical high road by actively promoting sound products and sales practices, not highest commissions. George Shave, a principal at the SFG Annuity family of companies has been vigorously spearheading integrity-based sales strategies to his agents nationwide, not just in states that have adopted stricter rules.  Shave says that “Now more than ever, the safe harbor points to provisionally sound contracts, backed by strong and reputable carriers. Shave believes that “Gaining client trust is all about communicating ethics from the top down – from the company and product being represented, to the advisor making the recommendation.” 

Unfortunately, many financial advisors still believe that embracing ethics, (ie; doing the right thing for their clients 100% of the time) would limit their options, their opportunities, and their very ability to succeed in business.  This is simply not true.  According to the Ethics Resource Center in Washington, D.C., those that are dedicated to doing the right thing and act on it consistently are more profitable than those who don’t. 

Jim Collins, the author of bestsellers Built to Last and Good to Great, has done extensive research into what makes companies highly successful.  When he recently was asked what his research indicated about the importance of ethics in building a successful company, Collins replied, “Our research points to one essential element in any successful company.  Those that are the best have built a set of core values and lived by them.

And, according to Shave, this integrity-based approach to sales has paid off for his agents in a big way - last year was SFG Annuity’s best year ever.  Why?  Shave says that “communicating ethics means more sales because there is no substitute for real trust” and that because ‘selling clean and simple products from strong companies is much simpler to do, this results in many more sales per agent, more repeat business from satisfied customers and opens the door for an incredible referral business.’

“The most important persuasion tool you have in your entire arsenal is integrity.”
Zig Ziglar, motivational speaker

Trends show dramatically increased interest in business ethics.  "People are waking up," said Shel Horowitz, author of the award winning book, Principled Profit: Marketing That Puts People First. "They are realizing that their ethics builds trust - that following and marketing an ethical stance is actually good for business."  Executive recruiters Heidrick and Struggles stated recently that “In this new era for business, glamour and glitz are out.  Transparency – in terms of ethics and values – is in.”

So maintaining ethics and integrity is in the best interest of every advisor in the financial services industry.  Those who demonstrate a high degree of ethics are recognized as business professionals that can be trusted, and trust is the foundation of all good relationships. 

“To be trusted is a greater compliment than to be loved.” 
George MacDonald, Victorian writer

Manchester Inc, a consulting firm in Philadelphia, used a survey of more than two hundred companies to discover the best ways to build trust with clients.  They found that people who engender trust…

• Maintain their integrity.
• Openly communicate their values.
• Listen with an open mind.
• Demonstrate compassion.
• Show sincere respect for everyone.
• Focus on the customer’s goals, not their own.
• Know their products.
• Maintain confidentiality.
• Always do the right thing even if it hurts. 

Remember, ethics is not a technique to be mastered, but is a quality of the heart. When you develop a strong reputation as an ethical professional, you will enjoy greater success as a trusted financial advisor, not only in the long term, but (contrary to popular belief) in the short term as well.

Published in: Senior Market Advisor Magazine - March, 2005 — SMA Website

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