Financial services can be considered a profession based on the myriad of services such as intermediation, consumer credit, investments, and advisory functions it offers. As an intermediary role, financial institutions are concerned with mobilizing savings and channeling them to deficit units in order to increase production capacities. This means that savers can access returns and these institutions are able to get income through interests. In relation to consumer credit, clients are able to access loans and investments based on a financial advisory from experts. On the other hand, factors such as insider abuse/fraud and conflict of interest constitute unprofessionalism in relation to financial services. Firstly, fraud may involve directors conniving with other staff for personal gains. For example, advisors may charge clients high commissions in order to benefit themselves. Secondly, conflict of interest may occur when professionals do not serve customers due to negligence of duties. For example, disregarding small scale investors, lenders, or depositors is considered unethical.
Fiduciary rule advocates for commitment by advisors when dealing with clients and ensuring that their needs are prioritized. This means that professionals will be required to put clients’ interest first in order to conceal potential conflicts (Epperson, 2016). Accountability, integrity, and transparency will be core elements that will have to be upheld by advisors. For example, there will have to be full disclosure of any commission or fee to clients. This means there will be higher accountability and integrity levels considering that all parties will have access to the same information. Furthermore, “Best Interest Contracts” will have to be disclosed for professionals considering commission as a means of providing advisory services. This will increase transparency and eliminate issues such as special bonuses and high commissions received by advisors. As such, this rule will significantly reduce commission structures, diligently serve clients, and make financial advisors more accountable.
Epperson, S. (2016). How the fiduciary rule works. Retrieved from https://www.cnbc.com/2016/04/05/how-the-fiduciary-rule-works.html.