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Nic Cicutti: The only way is ethics

I hope he won’t mind me saying it, but I’ve long had a soft spot for Harry Katz, North-west London’s finest financial adviser. In recent years, barely a week has passed without an email from Norwest Consultants’ principal, commenting on my latest column.

Regardless of whether we agree or disagree – and as often as not it is the former, not the latter – Harry’s missives are models of courtesy. He takes the time to explain why I am wrong, what the way forward is and couches it in a patient, rational style that aims to teach rather than berate.

If anyone could make me feel guilty about being constantly beastly towards IFAs, it would be Harry (John Ellis at the LIA and latterly the PFS used to have a similar effect on me, but he is now retired).

It is in such a context of friendly engagement that I want to pick a bone with Harry about ethics, a subject he recently wrote a letter on to Financial Planner, the IFP magazine. In his letter, Harry argued he does not understand why, as part of his CPD requirements, he must devote five hours of his annual study time to the subject of “ethics”.

He writes: “In my opinion, I act with the utmost honesty and integrity when dealing with my clients and in every case put their interests first. I also deal punctually and honestly, and in the best way I am able to, with the regulator, the tax authorities and any other bureaucrats I come across in my daily work.

“Other than that, I really don’t know what is expected of me. I fail to see why it is necessary to fulfil five hours a year of ongoing CPD with regard to ethics.”

It is a fair point but there are some obvious replies. The first is that while Harry may well feel his ethical standards are high and unwavering, not everyone is in the same boat. There have been too many instances in the past decade or so where IFAs have failed the ethics test.

The difficulty Harry faces here is that of creating a CPD environment in which IFAs would somehow be able to self-certify themselves as being completely perfect when it comes to dealing with ethical issues that affect them and their clients. Somehow, I don’t think that is a credible option, even for Harry.

Second, Harry’s position implies that he personally stands to gain nothing from spending five hours a year discussing ethical issues with other professionals, including tutors, or reading on the subject or doing whatever he needs to maintain his CPD compliance. Now, Harry may well be perfect in his ethical approaches to financial advice, service to clients and related issues but I suspect even he might have the odd lacuna in that field.

Third, and this is largely in praise of Harry and his practice, if we accept that his ethical standards are higher than his peers, that suggests he has a lot to teach lesser mortals with whom he would be engaging during his five hours of ethics CPD each year. He should see himself as a resource, while still accepting the potential to receive the odd glimmer of insight from his fellow-CPDers.

There are related issues that flow from the ethics-as-CPD debate. One is the issue of whether anyone in any walk of life ever gains much from a structured, even ritualised discussion on ethics. Surely you either get it or you don’t. If you do, why bother repeating yourself? If you do not, you shouldn’t be in the job.

Except that life is never like that. All of us start off with a set of ethics and a code of moral values in whatever work we do. The difficulty is that over periods of time those codes can slip or get bent out of shape. CPD offers an opportunity to rediscover and reconnect with the morals we had when we first started out in business.
Moreover, there is one more thing ethics CPD classes achieve – they prevent anyone from claiming that what they did came out of ethical ignorance.

Finally, there is the question of whether compulsory ethics teaching can ever work. Isn’t it a bit like forcing a five-year-old to eat sushi and like it?

Actually, the evidence on this score is slightly inconclusive. Some research from the US suggests ethics classes in business schools are not always effective. But that may be because many focus on bringing former business fraudsters to tell impressionable students how they cheated. Saying sorry doesn’t always sound convincing when you are Gordon Gekko and you made millions out of gullible clients.

The sessions that seem to work best focus on dilemmas, where there are no automatically correct choices but where you have to arrive at the best solutions through discussion and, thereafter, continuous reflection on your daily practice. It works for nurses, dentists, accountants and even lawyers, so why not IFAs?

I suspect Harry has a lot to offer in this area. Rather than keep them all to himself, he should share his ethical insights with fellow IFAs in a learning environment, as he has shared his other views with me. They and he would both gain from the experience, as I have.

Nic Cicutti can be contacted at


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There are 23 comments at the moment, we would love to hear your opinion too.

  1. The national brokerage for which I worked back in the 80’s had a very simple code of ethics that I’ve followed ever since and which I imagine is the guiding tenet of the way in which advisers such as Harry Katz and most others operate.

    That code is that you always strive to strike an appropriate balance between doing the right thing by your clients whilst at the same time earning enough money to remain in business. If you’re out of business you can be of no use to your clients.

    Sadly, because of the less than ethical behaviour of what I suspect is only a minority of the IFA community, all of us are now burdened with boatloads of red tape as a result of regulatory policy based on the lowest common denominator.

    The foreward to the Statutory Code of Practice for Regulators says:-

    The Regulators’ Compliance Code is a central part of the Government’s better regulation
    agenda. Its aim is to embed a risk-based, proportionate and targeted approach to regulatory
    inspection and enforcement among the regulators it applies to.

    Our expectation is that as regulators integrate the Code’s standards into their regulatory culture and processes, they will become more efficient and effective in their work. They will be able to use their resources in a way that gets the most value out of the effort that they make, whilst delivering significant benefits to low risk and compliant businesses through better-focused inspection activity, increased use of advice for businesses, and lower compliance costs.

    If only…….

  2. Nic you get your money too easy- get a real job.
    Its easy to say that the whole IFA community are bandits, but as you know this is not true there are still a high % of IFAs who do a good and honest job for their clients.
    You should be a politician, you would fit in nicely with your South East London University degree in bulls**t
    Ethic what ethics have you got?

  3. Interesting article. Ethics can be a very complicated subject (read Aristotle and others far smarter than I am) but in the context of dealing with other people’s money it boils down to two main things.

    1) Doing the right thing. Not the difference between legal and illegal as that’s black and white, but rather in those instances where there is no clear answer. In my experience it is extremely useful to talk those situations through with others, but to be effective it’s best to have real examples whether a “live” situation at the time or reviewing a previous real life example. It doesn’t really work on the basis of hypothetical discussion.

    2) Would you act the same if nobody was watching as you would if they are watching? And this one is where most of the serious ethics issues have impacted our industry. Sadly I think there is little that ethics courses or learning can offer, that would have avoided individuals or firms making the wrong choice because they think they can get away with it. I do agree with Julian Stevens that unfortunately this has led to bundles of red tape based on the lowest common denominator and maybe if the FSA were to improve on its discovery and enforcement the good apples would suffer less from the actions of the minority of bad apples.

    Ironically those of us who pass the test on my point 2 above, have the most to gain from any study and discussions on ethics. Therefore, on balance I’m in favour of a having ethics as a CPD/learning category because when faced with unclear situations we’re more likely to want to determine what is the right thing to do, and far more likely to actually do it.

  4. I agree that we should all have a degree of ethics in everything we do,be it financial,friends or whatever.
    Sadly we do not seem to understand that this is a way of life that is being eroded by ‘political correctness and compliance’.
    As soon as we say ‘we are honest and always have been’ the danger signs appear on the regulators and do gooders screens.
    Have we got the qualifacations and exams in ‘ethics’ to prove it?
    What a totally ridiculous state of affairs.
    Its just like saying ‘I am a fully qualified IFA ‘and therefore my advice is the best!!
    Ethics is a mixture of principles, morals, and many more personal attributes that we should be brought up on from childhood,and not trained to get a qualifiction in!
    I can see another revolution coming from the regulators who will see a spate of misselling, based on a lack of proof of the use of ‘ethics’ in the advice being given.
    Its a crazy world and I would ask you Nic to lead the way out, by being more rational and dismissive of this new madness.
    To our friends in Norwest-dont let the buggers get you!

  5. @Hugh Jarse: what south east London degree is that? I wasn’t aware of having obtained degrees from two different educational establishments. Nor have I ever tarred “the whole IFA community” as bandits, only a minority, so get your facts straight. As for “proper job”, have you ever looked at yourself in a mirror? Please do, and apply that same comment to yourself….

  6. Nic
    – have I hit a nerve – oooops

  7. Ooooooh! Hit a nerve have we Nic? You are looking in a mirror if you are reading your own comments. Narcissum time again me thinks, oh and a total waste of valuable coloumn inches AGAIN!

  8. I have no problem with ethics at all.

    Indeed the most important principles in oour firm are those of integrity, honesty, the principle that the client is everything are core to my business.

    However I do freely admit that I am constantly disappointed at the lack of moral fibre and ethical sensitivity exhibited by people in financial services.

    Having said that, I do see the same lamentable standards in many other businesses.

    My question is this?

    What other business has compulsory ethical training or is this desirable quality only deemed lacking in financial services?

    If that is the case on what planet do some people live?

    Ian Coley
    Medical Investment Services

  9. I work in the south of Essex, and with the mockney way of speaking round here, I can honestly say everything I do has ‘ethics’ in it somewhere!

  10. It is worrying that an industry should need to have such conversations. Says a lot about those in it unfortunately.

  11. I am inclined to agree with Ian Coley and Harry on this one.
    I have sat and passed R01 but find it insulting to be told II must pass an exam in ethics. Gap fill and being aware of ethics is fine, but I get really annoyed when people who have no ethics (and don’t have to pass an exam in it), tell me I must pass an exam in it to be able to cintinue to provide my clients with a service.
    Ethics are very personal and if I disagree with someone elses ethics, should that bar me from trading?
    Pol Port had a code of Ethics, I just don’t agree with it.

  12. The subject of mandatory ethics study is pointless, it just makes no difference. Take the whole Treating Customers Fairly charade. It did not work, every company had the paperwork to prove they had taken steps to treat customers fairly but it did not happen. The whole point of good marketing is to sell the same product for more money, the perception from the customer that they are getting more so pay more. Just because a customer is happy does not mean that it is OK, it could just mean that they are blissfully unaware of what should have been charged or done. The whole financial services industry is there to extract money from customers, the more complex the more chance of taking a bigger clip. The bottom line is that the more ethical you become the less chance there is of making a large profit; it just goes with the principles of ethics. This goes against the reason most set up in business, to make money, and if possible loads of it. Greed will always find a way, and in this industry it is the norm, the clever companies document their ‘fairness’ and the not so clever get fined.

  13. it will be the same as with every dictate passed.., those of us who are already ethically minded will continue to behave that way, those who are not will do the five hours as a lip service excercise to continue with whatever practice/code they want run. the regulator wants a boxed ticked regardless of the learning outcome. Mr Madoff or Mr Murdoch could get a certificate by certifying 5 hours of “STUDY”..

  14. I cannot accept being lectured in ethics by people who endorse the current FSCS levy.

  15. Just a thought... 27th April 2012 at 1:46 pm

    Ethics is the debate about what’s right and what’s wrong. Applied ethics is about the application to real-life scenarios where there is no definitive answer.

    Rather surprisingly, from the comments there seems to be an assumption that you are either ethical, in which case you are good, or unethical, in which case you are bad and no training is going to change that. I think you’ve missed the point completely. There are many scenarios where good people have difficult decisions to make and the discussion can be both enlightening and practical.

    For example, you are approached by a client in desperate need of advice and you can tell by the preliminary disucssion that taking the wrong path will cause them substantial loss. The advice is simple and quick for you to give but outside the client’s ability. However, the client does not have the means to pay your fees in full. Do you wave goodbye knowing they will make their own decision probably suffer loss, or give the advice at a discount or for free?

    Anyone who says there is no benefit in debating issues like this, with respect, is mistaken.

  16. Can’t the whole matter be covered by those 3 simple letters.: T, C & F…?

  17. Or simply Do unto others as you would have them do unto you….

    (Might be a good mantra for the FSA as well…)

  18. Just a thought, I have no idea what point you are trying to make. You are either ethical or not. I presume form the example you are trying to give, that you are trying to show that if you don’t give advice at a discount then you are unethical because the client will make a mistake. What is wrong with the truth? Tell the client what the situation is and say you are unable to help unless they can pay your fees. It is the clients decision from then on and you are not responsible. You do not have to be a charity to be ethical.

  19. Just a thought... 27th April 2012 at 5:22 pm

    Nigel, thanks for your note, apologies if I didn’t make myself clear.

    My point was that the debate is more important than the answer. I may decide to offer my services at a discount or even free and you may not. Both are ethical. There is clear unethical behaviour only where laws or rules are broken and these evolve over time.

    Why do laws, rules and attitudes change over time (think sex discrimination and the extent to which we help the disabled and those on benefits)? Informed debate about what is right and wrong, i.e. applied ethics. I’m interested to know why you would act differently to me.

    I would say that the study of ethics as applied to real situations is one bit of real education we get as opposed to the ‘training’ that makes up most of our CPD.

    I’m old enough to have received an education at school, I fear my children are simply being trained. I suspect we all know which is more valuable in shaping our environment.

  20. My answer is simple. In the many years I have been in business I have worked on the principle that it is not good business to cheat people. Mind you, I have never made a lot of money! What I would ask is how ethical it is for this journalist to make a living out of constantly belittling IFAs? A point he and his ilk seem to have missed, is that the great British public need us more than we need them!

  21. “If anyone could make me feel guilty about being constantly beastly towards IFAs, it would be Harry”.
    Read that statement as an admission of Nasty Nic’s ethics.. At least we now know the truth. Like the FSA, Nic insists he has no agenda against IFAs’. We know otherwise

  22. To Just a thought,
    The Short answer to your question is truth, which John Davidson touched on. Sounds very simple, but the financial services industry is all about deception. Everyone thinks that they are fair and honest, but just because you act the same as everyone else in the industry does not mean that it’s ethical, it may be accepted by everyone but that does not mean it is right and fair. I will give you a very simple example. One of the life offices I contact, in one particular department I always have to hold for 5-10 minutes to talk to someone and it always takes many weeks for the information to come through, and I am always given the same reason for the delay, ‘we are very busy at the moment and there is a backlog’ This been going on for years so I must conclude that the real reason is that they just do not employ enough staff for the level of business that they administer, but I am told something else, effectively they lie to me, not ethical at all. Like I said it is a very simple example but you get the idea. So how truthful are you? Totally you may say, but I could bet you almost anything that there are aspects to everyones businesses that hides the truth in some way, some very subtle some not so.
    An interesting comment about education at the end, I agree that schools no longer teach subjects, but now train students to pass exams, that’s why results get better each year, not because children are more intelligent, just better at passing exams, much like financial services companies, they do not get better or fairer with more regulation, they just get better at following rules.
    interestingly if you have ever read the book ‘Freakanomics’ you will realise that school your children go to has little to determine the outcome of children’s academic achievements, parents have the biggest influence. Who have you taken your own ethics from? Where have you learnt what is right and wrong, or what you can get away with?

  23. Here’s an ethics test:

    What would you do if you walked past a fiver on the floor?

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