Meeting A Need Over Making A Profit

Being a professional in business raises a number of dilemmas. To what extent are you obligated to serve the needs of your clients above your own? Charles Pillai, suggested that a key aspect of being a professional is to serve the public interest. But what about making a profit, and doing what's right for yourself, your business and your family?

There is the argument that making a profit is not what business is all about. Rather, it's about meeting a need, doing that well, and reaping the rewards thereof. Peter Drucker, the father of modern day management spoke of the purpose of business being to create a customer. Think of Steve Jobs. He famously argued that people don't really know what they need. Who knew they needed an iPad until it appeared on the iStore shelf?

When it comes to financial planning, things are both similar and different. Often people don't know what they need, which is why the industry as we know it today was built on the back of the selling of insurance to people who didn't know they needed it until they were sold it. But the industry is now different as it undergoes a shift from selling to advice. As a business, this means a shift from being an intermediary business to a professional advisory business. But what does this really mean?

The Financial Planner's Code of Conduct states that:

• Financial advisors need to act in a manner that puts the interests of the client first. They are trusted, and expected to look after someone else's assets as if they were their own. The notion of selling something to a person for personal gain is long gone.
• Placing the client's interests first is a hallmark of professionalism and is a core value of any profession. The Code suggests that financial planners who put their clients first, need to act honestly at all times and not place personal interest or advantage, in any form, before their clients' interests. (This is not as simple as it sounds, given the realities of being a professional in business there are many pressures such as client needs; employers' expectations; the expectations of principals or franchisors and the like; and their own need to grow and maintain a successful and sustainable business).
• The client's interests must, however, be served above all these competing demands. So whether one is an FPI member or not, financial planners have an obligation as the Code puts it: to maintain an ethical practice, regardless of their manner of compensation and as such advise their clients based on what is in their best interest. As a professional it is clear that the client's interest come before that of the financial planner and/or any other party.

Putting your client at the forefront of everything you do, will ensure a succesfull business while helping your client achieve their financial independence.

June 26 2017 By Rob Macdonald, Fundhouse Financial Planning