“The fact that man knows right from wrong proves his intellectual superiority to the other creatures; but the fact that he can do wrong proves his moral inferiority to any creatures that cannot.”—Mark Twain
In Iasi, Romania, I met an engaging 17- or 18-year-old woman named Sophia. She is a Ukrainian refugee. Sophia escaped the war in Ukraine along with her mom, sister, and aunt. Her father is serving in the military.
Sophia attended our seminars on Emotional Intelligence. The reason she requested to meet with me was to ask me, “How do I choose the right university?” And, “How can I get admission to a university in America?” I helped her think through these questions and even supplied resources to help her discover universities in America that have special programs for Ukrainian refugees.
Sophia wants to study Web Design. She knows HTML, Java, and Photoshop.
She is a ballroom dancer and model. When I asked her about the purpose of life and her worldview, Sophia said she has not thought about faith or God much. She categorically said, “There is really no right or wrong, nor is there really anything truly good or bad.”
I challenged this:
“Sophia! I am so glad to hear you say that! Poor Russia is getting criticized by everyone because they attacked Ukraine. You at least know they are perfectly within their rights since there is no right and wrong.”
This shocked her. Which was the point.
Nihilism is a philosophy that is increasing in popularity among young people the world over. The definition of nihilism is:
- “a viewpoint that traditional values and beliefs are unfounded, and that existence is senseless and useless;
- a doctrine that denies any objective ground of truth and especially of moral truths”1
Sophia is flirting with nihilism but, so far, she has only accumulated a shaky framework of opinions.
Right or Wrong
In November, 2023, NY Representative George Santos (who represented parts of Queens and Long Island) was the subject of a Congressional investigative panel charged with researching a myriad of accusations of “wrong-doing.” In fact, Santos faced a 23-count federal indictment that includes allegations of stealing donor identities, using their credit cards to make thousands of dollars of charges, and directing some of the money into his own account or into his campaign fund.
The scandal-plagued, federally indicted freshman representative from New York was expelled December 1, 2023, from the House of Representatives by a 311-114 vote, including 105 Republicans, to become only the sixth House member to be removed in U.S. history. (There have been over 11,000 house members in U.S. history.)
Question: Why should anyone care what Santos did or didn’t do if there isn’t any right or wrong?
Point: In a world that appears to be dismantling the traditional understanding of right and wrong, an independent financial professional (IFP) must continually work hard to conduct herself properly in order to maintain a clear conscience and remain professionally ethical.
Fascinating Etymology
The word “wrong” has an interesting history. Its origins have several sources:
- Old English, meaning ““twisted, crooked”
- Old Norse, meaning “crooked, wry, wrong,”
- Middle Dutch, meaning “sour, bitter,” (literally, “that which distorts the mouth”)2
(“Wry” is used to describe someone’s face that is twisted into an expression of disgust.)
Wrong=twisted, crooked, wry, sour, bitter; that which distorts the face or mouth.
(Conversely, the word “right” has this historical meaning: “to move in a straight line,” and “not bent.”)3
Question: Who gets to decide what is straight, unbent, or pleasant tasting?
The “Wrongs” of Independent Financial Services
In financial services, we operate in a world that still believes there are such things as right and wrong, good and bad. Our clients expect us to speak and behave with integrity. There are of course many layers of governance and standard-setting. Compliance reaches as far as it can, and regulators contribute to oversight, but at the end of the day we must manage ourselves to high ethical and moral standards.
The sad reality is that as an IFP it is easy to deceive, ignore, or even cheat clients every day and not get caught. The reason is because government oversight of IFPs is highly fragmented, and regulators from the Federal and State governments are not always in sync. There isn’t a central database documenting IFP misconduct.
According to the Stanford Institute for Economic Policy Research (SIEPR):
“There are over 650,000 registered financial advisers in the United States helping manage more than $30 trillion of investable assets.”4
“One in 13 financial advisers have a misconduct-related disclosure on their record.”5
“Misconduct is geographically concentrated. The highest rates of misconduct are in areas with more elderly and less-educated populations.”6
According to the U.S. Securities and Exchange Commission (SEC), here are just a few “wrongs” that IFPs perpetrate:
- Fraudsters may misrepresent their education.
- Fraudsters may lie about having been awarded honors that they have not received or that do not even exist.
- Fraudsters may pretend to hold certain professional titles to suggest that they have certain expertise or qualifications.
- Fraudsters may inflate their professional experience.
- Fraudsters may pretend that they have a certain position or title at a company.7
“Examples of misconduct included paying to settle customer disputes, being terminated after allegations of improper behavior, being held liable in civil litigation, or receiving criminal or regulatory sanctions.”8
Point: While we ourselves know if we are abiding by moral, ethical, and legal standards, we can sometimes fool others; and even if we get caught, we can still find ways to keep working in financial services.
Practicing in a Straight Line
It is each IFP’s free opportunity to create a reputation that aligns with personal character. It is also possible to hold ourselves to high standards of character. We can impact our clients’ facial expressions and the orientation of another person’s mouth to reflect positively on our work when our name is mentioned.
It is important to remind ourselves from time to time (maybe annually) of the commitments we individually make to ascribe to high ethical standards. A great place to start is reviewing the CFP Board’s Code of Ethics and Standards of Conduct.9
Another great barometer of our personal integrity is the extent to which we are willing to be held accountable by others. An accountability partner can ask us the hard questions.
Or we can simply check ourselves.
Practical steps:
- Review what can be discovered about your educational and professional background. Is it accurate?
- Are there discrepancies regarding your publicized background, such as conflicting information or dates?
- Are you confident enough to direct potential clients to sources where they can independently verify your credentials and professional claims with reliable sources, such as National Association of Personal Financial Advisors (NAPFA), Investment Adviser Public Disclosure (IAPD), FINRA BrokerCheck, and the web sites of state securities regulators?
- It is possible to operate 100 percent of the time above board and still experience a consumer complaint. If this is your experience, are you more comfortable hiding the fact or disclosing it and providing context and eventual resolution?
In general, a wise IFP invites every client to engage in open communication, to ask questions, and to demand transparency. To behave with transparency, do the following:
- Disclose all aspects of compensation.
- Go beyond recommending opportunities that are merely “suitable,” and choosing instead to specifically recommend only those that are in the client’s “best interest.”
- Take the time to explain your thought processes and investment strategies.
- Entertain all of your clients’ ideas, allowing them to have a say in their own financial future.
- Explore ideas and educate the client about why something might be plausible or perhaps inadvisable.
Here are great ways to give assurance to prospective clients:
- Explain how you make your money.
- Describe your approach to financial planning.
- Delineate the financial planning services that you offer.
- Clearly define the particular type of clients you normally work with.
- Make it known if you enforce account minimums.
- Provide a checklist of the information prospective clients need to bring in order for you to develop a financial plan.
- Notify all prospective clients regarding how many times and how often you will want to meet with them.
- Let all clients and prospective clients know if you are willing to collaborate with their other advisors like CPAs or attorneys.
Summary
While traditional social constructs of right and wrong appear to be in flux, or eroding, those of us in financial services must diligently strive to operate in ethical, moral, and legal ways.
How much better to create sweet experiences for clients rather than leaving them with a sour or bitter taste in their mouths!
In his book, A Failure of Nerve: Leadership in the Age of the Quick Fix, Edwin Friedman wrote:
“Leaders must always focus first on their own integrity.” This is also true of IFPs.
Footnotes:
- https://www.merriam-webster.com/dictionary/nihilism.
- https://www.etymonline.com/word/wrong.
- Ibid.
- https://siepr.stanford.edu/publications/policy-brief/misconduct-under-microscope-examining-bad-behavior-financial-advisers.
- Ibid.
- Ibid.
- https://www.sec.gov/enforce/investor-alerts-bulletins/ia-credentials.
- https://www.policygenius.com/personal-finance/news/how-to-vet-financial-advisors/.
- https://www.cfp.net/ethics/code-of-ethics-and-standards-of-conduct.
- A Failure of Nerve, Revised Edition: Leadership in the Age of the Quick Fix, by Edwin H. Friedman, Church Publishing; 10th Anniversary edition (May 1, 2017).
All About Home
“Home is the place where, when you have to go there, they have to take you in.”—Robert Frost
I have always liked this humorous quote about what “home” is, but there are two powerful words embedded in it: “have to.”
In independent financial services, we are armed with tools, products, approaches, and solutions to meet people right where they face “have to.” This is nowhere more in evidence than in the sphere of home.
Home is defined as:
I would add that home is where life happens and where responsibilities converge.
Benefits and Responsibilities of Home
The Eastern Tent Caterpillar is a familiar pest for people living in Eastern North America, especially in the Northeastern United States. From Canada, South to Florida, and West to the Dakotas and Texas, they defoliate trees and build their unsightly tents.
As adults, they are moths that are fluffy, tan to light brown in color, and have two white, oblique stripes on the wings. Quite handsome, actually.
As caterpillars, they are hairy, mostly black with a white stripe down the back, featuring brown and yellow lines along their sides, and they have a row of oval blue spots on the sides. Again, fairly good-looking.
The adult female moth lays 150-400 eggs in masses that are covered with a shiny, black varnish-like material. These egg masses encircle branches that are pencil-size or smaller in diameter. The animal overwinters as eggs. The eggs hatch about the time that the trees’ buds begin to open, usually in early March.
Let’s focus on their nest. Eastern Tent Caterpillar nests are commonly found on wild cherry, apple, crabapple, and similar rosaceous trees. After hatching, they form web tents through collective effort. The individual caterpillars weave silk from their salivary glands. During the useful life of the tent, the caterpillars each continue to add to it to increase the space it affords. These tents occur in the crotches and forks of branches in Spring and early Summer. These tents serve multiple benefits for the caterpillars:
Problem: These creatures eat leaves, and the leaves are outside the nests. They must travel outside the nest to forage. They “have to” take time from foraging to work on the nest. “To have a home is to incur costs: It has to be made, and it takes time, energy, and expertise to make, and the wherewithal to travel to and from it.”2
Point: To have a home is to incur costs. It requires maintenance. It provides a base from which all of life flows.
Intersection of Financial Planning and the Home
The English word, “economics,” is derived from the Ancient Greek word οἰκονομία (oikonomia), which is the combination of two Greek words, “Oikos” meaning household, and “Nomous” meaning management. Interestingly, when we speak about the economy, we generally mean the entirety of the activities of all the people. However, managing the economy starts at home.
Home ownership and financial planning are actually closely intertwined in many ways, including:
Point: To own a home is to incur financial obligations over a long period of time and experience short-, and long-term financial consequences.
Focus on the Home
As an independent financial professional (IFP) you need to pay attention to cultural and economic swings that often impact the very place where people live. Many cultural forces combined with economic forces cause fairly dramatic shifts in when people enter the housing market, where people choose to live, and what accommodations they prefer.
Generational Differences
Home ownership is heavily impacted by generational shifts. “Millennials adapted more quickly to new technology than older adults and were the first to prefer consuming content online. They also disrupted consumer behavior patterns by forming their own brand of life stage priorities. They now make up the largest share of what should be the homebuying population. Millennials shifted the timing of various life stages, represent the most racially and ethnically diverse adult age group, and earn more than prior generations.”4
According to the Freddie Mac Single Family Marketing Analytics, Market Research, and Insights Department:
On the other hand, for older people, a prime reason for purchasing a home is the desire to be near children and grandchildren.
Desire to be closer to family/friends/relatives (Percentage Distribution of Buyers)9
Favorable Tax Structure
People sell houses and buy houses for a variety of reasons, including:
The latter is heralded by some social scientists as an increasingly important factor.
“Of the 10 states that experienced the largest gains in income taxpayers (2020-2021 IRS migration data) four do not levy individual income taxes on wage or salary income at all. There is a strong positive relationship between state tax competitiveness and net migration. Overall, states with lower taxes and sound tax structures experienced stronger inbound migration than states with higher taxes and more burdensome tax structures.”10
Impact of Rising Interest Rates
According to a study conducted by US Bank Wealth Management:11
Point: As an IFP it is important to stay current on the impact of cultural and economic trends on your clients’ housing choices and financial objectives.
A Strong Financial Home
According to the Consumer Financial Protection Bureau,® (An official website of the United States government), “Financial well-being means having financial security and financial freedom of choice, in the present and in the future. More specifically, having financial well-being is when you:
Finances play a role in the way we feel every day. An individual’s or family’s overall well-being is greatly influenced by the impact of poorly-controlled spending, unwise investing, misjudgments in major purchases, irresponsible debt accumulation, and intra-family disagreements over money.
A wise, caring IFP who takes the time to understand the home dynamics can have a lasting impact on individuals and families.
Point: We cannot overemphasize the important opportunity for each IFP to enter into a person’s life, impact the whole family, and make a lasting difference in their entire homelife.
Summary
A dear friend of mine is concerned about the environment. He knows he can have limited impact as a solo player in the theater of humanity, but he does what he can. He regularly walks on the roadsides and picks up litter.
As an IFP, you may have grave concerns about the trends in the National Economy, or World Economy. You may fear the possible disruption that AI poses, the challenges of restoring robust supply chains, or the size of the National Debt. You may not have much ability to impact the larger picture, but you certainly can make a difference one home at a time.
Managing the economy starts at home.
“The strength of a nation derives from the integrity of the home.”—Confucius
The best place to start is to help your clients to review the decisions from their past that led to the current state of financial affairs, and then move on to building attainable, satisfying financial goals and objectives.
“I realized that home is where there are both knowledge of the past and plans for the future.”14—Bernd Heinrich
Huge numbers of people across the United States need your professional expertise. Make every effort you can to bring the tools, products, approaches, and solutions to meet people right where they face their biggest challenges—in the sphere of their own home.
Footnotes: