Ethics Foundations

The word 'ethics' derives from the Greek ethos; Aristotle taught that the ethical person is one with virtuous habits (e.g. truthfulness, justice, honour, good temper) that can be learned through education, training and practice. Ethics is both a field of study — a branch of philosophy asking what makes a person or action 'good', what we owe others, and which obligation takes priority when duties conflict — and a skill, known as applied ethics, where a person develops moral decision-making competency.

Professional ethics is a set of codes of conduct or moral principles governing how a professional deals with clients, fellow professionals and the public — it means doing the right thing even where the consequence is losing the business. The role is a privilege: a representative can ask a complete stranger for sensitive financial information, so ethically he must analyse it and recommend products that place the client in a better position than before — an adviser acting solely to make the sale has failed the code.

Ethics matters intensely in financial services because the products (banking, insurance and capital-markets products) are intangible: clients cannot inspect them and must rely on and trust the representative for suitable advice. Trust is easily destroyed — Warren Buffett is quoted, 'It takes twenty years to build a reputation and five minutes to destroy it' — and a prevailing lack of ethics almost certainly invites more government regulation. Former MAS Managing Director Ravi Menon, in his 2015 speech 'Building a Culture of Trust in the Financial Industry', stressed that obligations towards clients are not just contractual but moral.

Compliance is the act of meeting a given set of laws, rules and regulations; its driving motivation is fear of the penalty (sanctions, warnings, reprimands, prohibition orders, financial penalties, licence revocation, or criminal proceedings) if one is caught. Ethics requires more than compliance — it stands on higher moral ground, applying one's moral beliefs to go beyond what the law prescribes because it is the right thing to do.

Compliance follows the letter of the law; ethics reflects the , doing the right thing for its own sake. Hence conduct can be (e.g. a trainer using a course as covert recruitment without being transparent), or (a well-meant plan that breaches a regulatory rule). Merely 'clocking' CPD hours — signing in, playing on a phone, signing out — is technically compliant but not ethical.