The opposite of ethics!

Just as ethics can shape the process and the outcome, the same awareness of outcome and its differentials can be used to design, structure and deliver unethical outcomes that no amount of ethical interaction can assuage. Where the opposite of ethics, and not the absence of sensitivity to ethics, has shaped an outcome, we need to rethink our approach to the ethical solution.

I was just reading “Creating an ethical framework for the financial services industry” by Professor Julia Black, London School of Economics & Karen Anderson, partner, Herbert Smith Freehills LLP. One of its questions was “How should firms and regulators go about instilling an ethical culture?”.  I was not convinced that the heart of the matter had been considered.

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Do ethics really have no place in a relationship of trust?

In Canada, what we have at the moment are standards that even imbeciles could execute, but outcomes that mostly only experts could fully understand or, in  a moment of madness, would wish to own.

Best interests standards would likely lead to solutions that would pass the judgement of experts but that can be generically understood and accepted by the ordinary individual without legal consequence.

Best interests standards, contrary to the rote propaganda being churned out, would lower costs, increase standards, improve sophistication of output and reduce legal liabilities and negative investor outcomes.   They are the future!

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Ethics in the quantitative concerns itself with a surreptitious exchange of value without informed consent…

The boundaries of manufactured suitability are so wide that even an egregious deviation could appear to lie in the shadow of the rules.

I am a capitalist at heart and my belief in ethics has nothing to do with “social” policy per se, but the ethics of imperfect outcomes.  So when I read Barbara Shecter’s recent article, ‘Shocking’ crackdown on advisors threatens smaller players: Tony De Thomasis”, my ethics sense started to ring loudly.  It has been ringing a lot recently.

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Ethics and outcomes

One way of interpreting ethics in the financial services sphere, in my opinion, is that ethics is an awareness of the differences between an unfair and a fair competitive market outcome.  At the moment regulation enforces the rights of one (the transaction) while ignoring the rights of the other (the right to advice that equates with the representation). This is both unfair and arguably unethical.

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A green light for low ethical standards or has “best interest standards” been given the go ahead?

Leaders lead and set standards and examples.  Yet, with the Canadian mutual fund point of sale document we have, inter alia, a) something which has been allowed to be sent after the transaction and b) something in which information critical to making informed decisions has been taken out of the frame or dumbed down so as to be worthless.

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Ethics, markets, economics and advice.

Few understand the dynamics of a present which is often at odds with the realities and limitations of the future.

The Institute of Economic Affairs report, “Will Flat Lining Become Normal”, discusses some important and relevant issues.  The report discussed the UK economy, but many of the issues affecting the UK economy, affect global economies too.  Its main conclusion that sustainable economic growth in the UK has fallen by over 1% (to 0.8%), is a figure that is very close to assumptions I came to in my 2010 Capitalism in Crisis 4 report.

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