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Call of duty
As a profession we are well versed in the notion of a ‘duty of care’ to our clients. ‘Duty of care’ is defined as “a moral or legal obligation to ensure the safety or well-being of others”.
I get it. And you get it too.
Let me give you a couple of examples where I believe a duty of care has not been well handled.
Gambling companies are coming under the microscope for making offers to new joiners that are not quite what they seem, according to the Competition and Markets Authority (CMA). Think of all those adverts that say “Sign up now and receive £50 of free bets!” Or “Deposit £100 on xyz poker site and receive £100 free!”It turns out that gamblers who take up these offers generally have to make a very high number of bets to even qualify for the bonus. And all too often much of the bonus is not paid at all due to the terms and conditions.
The FCA is looking very closely at Defined Benefit (DB) pension transfers. Are advisers remaining mindful of their duty of care, even in the face of insistent clients?
Does any of this matter?
Capitalism redefined
One view of capitalism says that businesses are out to maximise profits. So buyer beware.
I don’t subscribe to that view.
In their Harvard Business Review article, The Error at the Heart of Corporate Leadership, Joseph Bower and Lynn Paine state that: “a way of thinking about the governance and management of companies […] is now pervasive in the financial community and much of the business world. It centers on the idea that management’s objective is, or should be, maximizing value for shareholders.”
As anyone who knows me will attest, I’m all for Financial Planning businesses, and any other businesses, making a profit. In fact, I’m hot on it. I just can’t sit by and watch good Financial Planners earning a mediocre living. It hurts me. It’s why I do what I do.
However, I’m also hot on the fact that you can achieve that goal AND:
Put clients first – acting as a Fiduciary
Open and build lifelong client relationships
Treat your staff well
Be a committed and positive contributor to your local community
Have great relationships with your suppliers
Be strong in your marketing messages – without lying or spinning your message
Much of the political debate at present seems to be based on a feeling that capitalism is not being done right in some respects. Capitalism done right is a force for good.
Everyone wins
Seth Godin captured it brilliantly in a recent blog, Merely Transactional. He passed comment on the view that once the customer has paid their money and you’ve delivered the service you’re ‘even steven’.
“The problem with ‘even steven’ is that it turns trust and connection and emotions into nothing but a number. Revenue on a P&L. It ignores the long-term in exchange for a relentless focus on today. Only today.
There’s an alternative view of capitalism. Modern capitalism. Capitalism for the long-term. In this view, the purpose of an enterprise is to make things better. To minimize negative externalities and create value. Value for the owners, sure, but also for the workers, the customers and the bystanders.
“We owe you everything.” You trusted us. You showed up. You tolerated our impact on your world, even when you didn’t invite us in.
It’ll never be even steven, but we can try to repay you. Thank you for the opportunity.”
We’ve all had negative experiences dealing with ‘jobsworths’ or poorly run businesses that operate on the ‘I did the minimum to earn my money from you, so what’s your problem?’
It’s no way to go through life. And it’s no way to create a better society.
Money isn’t everything
In light of this new way of looking at capitalism I have a few questions:
When did it become ‘good business’ to not think about the relationship with the client?
When did it become ok not to consider the impact of your business on the local community, the environment, your suppliers, your staff and other stakeholders?
What measure are businesses that are only focused on profit using to count the opportunity cost of ‘lost’ future customers?
I know you know this, but I felt the need to say it one more time: Financial Planning done right makes a massive difference. To your clients, to you, your family, your staff, your local area, and yes, to society as a whole.
If you’re struggling to find your ‘why’, or to understand the importance of what you do, then I hope this article has given you a chance to reflect positively on your role as the owner of a small Financial Planning business. It’s a role far bigger and more important than just making money.
Let me know what you think.
Further Reading:
Joseph Bower and Lynn Paine
Here’s another snippet from the Harvard Business Review piece I referenced above.
“Attributing ownership of the corporation to shareholders sounds natural enough, but a closer look reveals that it is legally confused and, perhaps more important, involves a challenging problem of accountability.
Keep in mind that shareholders have no legal duty to protect or serve the companies whose shares they own and are shielded by the doctrine of limited liability from legal responsibility for those companies’ debts and misdeeds. Moreover, they may generally buy and sell shares without restriction and are required to disclose their identities only in certain circumstances.
In addition, they tend to be physically and psychologically distant from the activities of the companies they invest in. That is to say, public company shareholders have few incentives to consider, and are not generally viewed as responsible for, the effects of the actions they favor on the corporation, other parties, or society more broadly.
Agency theory has yet to grapple with the implications of the accountability vacuum that results from accepting its central—and in our view, faulty—premise that shareholders own the corporation.”
The article is worth a read in full if you, like me, believe that business can be a force for good, and not merely a way to maximise profits at any cost. I can’t recommend this article highly enough. Read it in full here.