Question

securities presented to clients. 4. Why do professional organizations need a Code of Ethics? Why is this important for a financial planner?

Answer 1

A Code of Ethics is part of a larger framework of Internal Controls and is guided by COSO (Committee of Sponsoring Organizations of the Treadway Commission). A code of ethics is a guide of principles designed to help professionals conduct business honestly and with integrity. A code of ethics document may outline the mission and values of the business or organization, how professionals are supposed to approach problems, the ethical principles based on the organization's core values, and the standards to which the professional is held.

A code of ethics also referred to as an "ethical code," encompass areas such as business ethics, a code of professional practice and an employee code of conduct. A code of ethics sets out an organization's ethical guidelines and best practices to follow for honesty, integrity, and professionalism.

A code of ethics is important for businesses to establish to ensure that everyone in the company is clear on the mission, values and guiding principles of the company. It provides employees with a framework of which rules exist, from a regulatory and law-enforcement standpoint and how to act in the gray areas of value-based ethics that aren't always clear.

Acting with integrity and honesty is the bedrock of all successful businesses. This facilitates trust both externally as well internally, i.e with customers trusting that good quality products are being provided to them, with regulators that the firm is functioning in the overall interest of the public, with Bankers that the capital being raised is being used for the purpose for which it was raised, with investors that the Company is sound and is not aggresively taking business risks with their money as well as with employees that their jobs are secure.

In a Financial Planning environment, a Financial Planner is all the more susceptible to being questioned about the advice he gives, about the decisions he makes, about his professionalism as every planner needs to instill confidence and trust in the minds of people who rely on him.

1. A "Client first" attitude is important to instill that confidence.

2. Allowance can be made for legitimate differences of opinion, but integrity cannot co-exist with deceit or subordination of one’s principles. Integrity requires the financial planning professional to observe both the letter and the spirit of the Code of Ethics.

3. Acting with professionalism enhances and maintain the profession’s public image and its ability to serve the public interest.

4. Confidentiality requires client information to be protected and maintained in such a manner that allows access only to those who are authorized. This helps in becoming a trusted advisor.