Introducing The American College Ethicist

The financial services profession, with all its breadth and nuance, can present an array of ethical quandaries and predicaments to ponder. The American College of Financial Services is here to offer insight and perspective into your own professional ethical dilemmas.

Are you looking for some perspective on an ethical issue? Julie Anne Ragatz, the Charles Lamont Post Chair of Ethics and the Professions, Director of the Cary M. Maguire Center for Ethics in Financial Services, and Assistant Professor of Ethics, wants to hear from you.   

The Question

Over the years, the number of high-net-worth clients I serve has grown along with my business. Serving these affluent clients is more financially and intellectually rewarding accounts; I’d like to focus more of my effort on these clients, but I’m uncomfortable transitioning my older, lower net worth clients to a junior advisor. I made a commitment at the onset of our engagement that I would be the lifelong advisor on these accounts. Moreover, as my junior advisors themselves become more successful, they’ll find themselves in the same situation. I fear that these lower-net-worth clients will just continue to be transitioned from one junior advisor to the next. Given these concerns, do I have an obligation to keep these clients?

The Consideration

This is a significant concern. The provision of financial services, which are designed to provide financial security and protection against risk, should not be limited to the wealthy. The profession should be actively seeking ways to ensure that middle-class Americans have access to technically competent and professional financial advice.

But does this particular advisor have an obligation to retain clients when it may not be in his or her economic interest to do so? Does this answer change depending on whether the advisor made a promise to be the client’s advisor for life?

It is important to note that the advisor in question also has duties to new, more affluent clients. On one hand, we can make the case that it is unfair to expect clients paying higher fees to essentially subsidize other, less lucrative clients. On the other hand, it is hard to advocate breaking a promise, which is almost always ethically problematic. This does not mean that promises should never be broken, but it does mean that it needs to be done in a certain way. Specifically, we need to acknowledge that we are breaking a promise and be willing to take reasonable action to rectify the harm being done.

In this case, I think that the letter writer does not have a general obligation to maintain these clients. It is ethically permissible to transition these clients to another advisor with two stipulations. The first is that the change is communicated in a way that acknowledges that this represents a breaking of the original promise. The second is that the transition is done in such a way that it minimizes harm (and maximizes the chance for good) to the client. This would mean providing additional support for a period to the new advisor as well as remaining available to answer questions until both parties feel comfortable moving ahead. Remember that it is not only important to perform the right action, but also to perform that action in the right way.

This case is a reminder to us to be careful about the promises we make and not to be overly optimistic or overconfident in committing our future selves.  It is not good, personally or professionally, to get into a habit of breaking promises. Perhaps the best advice is to refrain from making promises you are not sure you can keep.

Have a question for The Ethicist? Send it to ethicist@theamericancollege.edu. Your name and identifying information will remain confidential. Questions submitted are subject to editing for grammar, length and style.

Julie Anne Ragatz holds the Charles Lamont Post Chair of Ethics and the Professions and is the director of The American College Cary M. Maguire Center for Ethics in Financial Services. Professor Ragatz teaches in the MSM, MSFS, and PhD programs at The College, and is currently a PhD candidate in Philosophy at Temple University.