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“Integrity is doing the right thing, when no one is watching.” C.S. Lewis gets the credit for this observation. When people list the traits they seek in a financial advisor, honesty is high on the list. It is expressed in different ways, like “putting clients first” or transparency, but having integrity and a good sense of ethics is an important selling point. How do you do it?
Other traits like experience or analytical ability are easy to communicate. “I’ve been in the business 15 years” or a plaque on the wall showing you earned the CFA designation get this point across. Ethics and integrity can be tougher to document. You can’t say “I have integrity” or “I haven’t been arrested (yet).” It is your actions that get the point across.
1. Confidentiality. You might get asked, “Do you talk about your clients?” The financial services industry, like the medical, accounting and legal fields, is bound by a code of confidentiality. It is one of the characteristics helping define it as a profession, not just a job. You can get this point across by asking them how long you have known each other. After they answer, ask if they ever heard you mention someone’s name as a client. (No.) If I haven’t done so before, I am not starting now.
2. More on Confidentiality. A client is connected to a charity. They are fundraising. After bringing up a name and mentioning that person has revealed they are your client, they ask about the person’s financial health in connection with a donation they will be soliciting. When you mention confidentiality, (perhaps with neither confirm or deny) they say, “surely you can tell me something.” You might say, if the situation was reversed and someone approached you, as your advisor, asking questions about your financial health, would they be OK with you sharing details? The answer will be “Absolutely not.”
3. By the rulebook. Many client accounts are in joint name, yet many carry individual names, like IRA accounts. You might call them with an idea. They like it, giving you the go ahead to make the purchase. They also say “Do it in my wife’s account too.” You explain there needs to be a Power of Attorney on file before you can proceed. While this is a good long term step that should be taken, having them get their spouse on the phone to give authorization may be the immediate solution.
4. Signing each other’s names. You work in an industry requiring lots of signatures. Couples often feel “self authorized” to sign each other’s names. They often explain it’s an arrangement they agreed to between themselves. Remember “What happens in Vegas stays in Vegas”? Today, when you sign someone else’s name to a document, it lives in cyberspace forever. If there is ever a problem, they can call back that document and say “That’s not my signature.”
5. Inventing numbers to put onto forms. In addition to plenty of signatures, account documentation requires plenty of forms to fill out. These often invoice numbers about salary, assets and net worth. Some people pull numbers out of the air, simply to get it done. That’s not in the spirit of the “Know your customer” rule. The guy at our post office said it well when I was filling out a Customs form and asked the same question. He said “When you sign your name, you are attesting everything above your signature is true.”
6. You don’t gossip. Gossip is fun. It gives many people a jolt of excitement to talk about someone who is not present. It is good to disengage yourself from the conversation or mention it’s impolite to talk about someone when they aren’t present. When you do engage in gossip, the unspoken message to others in the group is you talk about others behind their back too. They might wonder if you talk about them.
7. You explain fees. This can seem touchy. Why go looking for trouble? You might assume everyone knows you don’t work for free. Investment firms make money. They might be wondering “What is this costing me?” They might feel awkward asking the question. Someone else might tell them. Their accountant likely mentions fees paid to your investment company when preparing your taxes. I found it makes sense to say “This is how we make money” when doing a trade or introducing a new product to a client. It removes the uncertainty.
8. Don’t appear richer than the client. This ties into fees. If you take better vacations, live in a better neighborhood and drive a better car, your client might wonder how you can afford your lavish lifestyle. Sometimes they assume all the fees they pay to the firm go directly to you. If you brag about “What you’ve got” they may feel it came at their expense, they are overpaying and will seek to renegotiate fees downwards.
9. Treating everyone as an equal. Insecure people, those feeling sone people are better, often feel the need to badly treat people on a lower rung of the social ladder. You have heard the Hollywood saying, “Be nice to the people you meet on they way up. You will meet them again on the way down.” When you treat servers, flight attendants and hotel staff with respect, many people see this as a sign of integrity.
10. Speaking highly about competitors. Everyone’s a comic. When a friend tells you they work with an other firm, you might want to exclaim “Are they still in business?” You know little about their situation. Their siblings or parents might work there too. Unless there is an extreme reason, like a seriously negative front page headline, a good response is “Yes, they are a fine firm.” You have compliment the other person.
11. Respecting the current advisory relationship. You know about The Golden Rule. It is logical to assume everyone who invests works with a firm somewhere. They might have an online relationship, but they might have a fellow financial advisor. If so, you might ask a couple of questions, like how long they have been together or “What do you like best about your advisor?” If the answers are positive, congratulate them on finding a good advisor. Move onto another subject.
Integrity is doing the right thing when no one is watching. These actions all deliver the message “I take the high road.” Circumstances change. This person might not become your client now, but they will remember your traits later. They might also send a referral in your direction.
Related: Why as an Investor I Am Not Worried About the Next Four Years