I get a lot of spam from online publications. One I got that had this headline caught my eye “Altruism: The real ethical dilemma faced by financial planners.” This seemed a little odd to me. I would have responded directly, but didn’t want to sign up for another account. So, where to begin. The article makes a philosophical argument against altruism (as defined by Auguste Comte) in the finance sector. I honestly didn’t know such an argument was needed. The financial industry is well known for its “greed is good” motto. Altruism is anathema to an industry that isn’t beholden to anyone except themselves. The author asserts that Bernie Madoff as an example of altruism, because he lost his son. Madoff sacrificed everyone else except himself and got caught because he was flat out stealing money, this isn’t altruism in any way shape or form. You almost have to read this article to believe that people actually believe this warped sense of reality or obligation to society.
He seems to confuse two very different ideas which is fiduciary duty and altruism and builds the straw-man argument that since people can’t truly be altruistic (essentially we can’t put someone else’s needs before our own) one’s fiduciary responsibility is a conflict of interest.
“The implication in all of these ethical codes is that honesty and integrity are at odds with personal gain, and that the former must take precedence over the latter. This would only make sense if the profit motive is inherently dishonest, evil, morally bad. After all, if advisors put their own interests first, it must mean that advisors have to profit at the expense of their clients.”
The last sentence is the problem he glosses over as if that scenario doesn’t happen. The profit motive is morally neutral and can be wielded either way. One can choose to go the Bernie Madoff route of go the Warren Buffett route. How one chooses to make money via financial products is one’s choice. Advisors do not get a bad wrap because of their altruism. The financial sector is poorly rated in the ethics department because their fiduciary duty to their client isn’t taken seriously. The financial sector has systematically and industry wide taken money out of IRAs, 401ks and other “financial instruments” by directly betting against them, and of course winning that bet. At worst, this article is a confession saying “don’t trust me please I’m too selfish to know better.” Can money have a corrupting influence? That is the issue and that is why regulations are in place. While the author expounds the virtues of Ayn Rand’s Libertarian wet dream, the truth of the matter is people do bad things for all sorts of reasons and money is a big one. If you (financial planners) are to consider yourselves professionals than having a fiduciary responsibility to your clients is a bond that can not be betrayed. As far as I know, no one has asked financial planners to sacrifice anything on the pyre of altruism and to suggest it is silly. All that people want is to have their money invested and return a profit (any conflict of interest of the advisor fully disclosed), if that means giving you a fee or some other mechanism of compensation, so be it. While part of the conclusion is having harmony with your clients interests while maintaining one’s interests first (essentially one asserts their interests and the client is along for the ride), seems like an exercise in the obvious that didn’t need an article. Still, a fiduciary responsibility is needed or else one’s interests may emulate the path of Madoff. The author ends with this horrifying suggestion.
“Until the industry stands up and proclaims its right to exist without any government interference or regulation, until advisors learn to be truly proud of their profession and throw off the pretense of altruism, we will continue down our own road to moral and political serfdom. We can turn back the tide. The question is: Will we wake up and do it before it’s too late?”
Considering that this industry continues to have special access to political parties and policy making despite bringing the economy to its knees during an era of deregulation, I hope that this beast gets a few more chains to avoid the author’s virtual economic hellscape.