Ethics in any service is important, but in financial services it is the absolute gold standard. The concept of ethics in the financial services industry basically refers to the principles which guide the conduct of individuals and organisations operating in the sector. These principles play a critical role in building security and trust in interactions between clients and providers, and include: honesty, integrity, fairness, transparency, and the highest level of responsibility.
Honesty and integrity.
Firstly, ethical behaviour builds trust with customers. Financial services providers must earn the trust of their customers to succeed – after all, customers trust their financial service providers with their financial well-being, and therefore expect their service providers to act in their best interests. Ethical behaviour is a crucial component of building and maintaining trust with customers. Service providers who act ethically are more likely to retain customers and attract new ones through positive word-of-mouth referrals.
Fairness and transparency.
The financial services industry relies on accurate and reliable information to make sound decisions. Ethical behaviour helps to ensure that information is not distorted or concealed in any way. Financial service providers must adhere to certain standards in their communication, advertising, and marketing practices. By doing so, they promote fair competition and prevent misleading or deceptive practices.
Reputation and credibility.
Ethics are essential to maintaining sound character within the financial services industry – and of the industry itself. The industry has a reputation for being complex and difficult to understand, so ethical behaviour is key to promoting trust and transparency. When financial service providers act ethically, they are seen as accountable and credible. This, in turn, helps to attract and retain customers and investors.
Protection of stakeholder interests.
Financial service providers have a responsibility to act in the best interests of their stakeholders. This includes customers, shareholders, employees, and the wider community. Ethical behaviour helps to ensure that stakeholders are not exploited or harmed by the actions of financial service providers. For example, unethical behaviour in the banking industry can lead to the exploitation of more vulnerable customers through high fees and interest rates.
Responsibility in keeping financial markets stable.
The role financial services play in keeping financial markets stable is significant. The market cannot tolerate the negative results of disruptions caused by unethical behaviour. The 2008 financial crisis, for example, was triggered by unethical practices in the housing market. The collapse of several large financial institutions led to a global economic downturn. Responsibility in the constraints of ethical behaviour is critical to maintaining the stability of financial markets and preventing systemic risks that can have far-reaching consequences.
Back office support – the keynote of ethics
- A prerequisite for a profitable, controlled and successful financial services business is a strong, stable and efficient back office operations function. Back-office functions include key fundamental processes such as: record maintenance, regulatory compliance, accounting, and IT services.
- The term ‘back office’ originated when early companies designed their offices so that the front portion contained the associates who would interact with customers, and the back portion of the office housed associates who needed no interaction with customers, such as accounting clerks.
- Despite impressive advancements in technology, experienced personnel are still required to deal with transactions which, for whatever reason, fall out of the automated process and require human intervention. In the financial services industry this means personnel who are highly trustworthy, diligent and responsible.
- Financial service providers must adhere to ethical standards to ensure they continue to act in the best interests of their customers, shareholders, and employees, as well as the wider community. By doing so, they ensure the long-term sustainability and success of their businesses.
Find the top-class professionals who can meet your expectations
Complete Financial & Business Solutions (CFBS) comprises a group of top-class professional financial advisors and business analysts committed to sound financial and business solutions based on a highly personalised approach. Passionate about ensuring peace of mind through the in-depth analysis of individual financial and business circumstances of our clients, we are able to create unique solutions, and regularly review these solutions to consistently meet service expectations and lifestyle goals.
Find us at: www.cfbs.co.za
