The 3 Moral Types Managing Your Money
In the late 1970s, business academic Archie Carroll published some now classic work on corporate ethics and social responsibility. His work includes the well-known CSR Pyramid (Corporate Social Responsibility), which deals with stakeholders, economic responsibilities, philanthropy and many other related issues.
Of particular relevance to private investors, however, are the three moral types commonly encountered in the industry. Your financial fate is influenced very substantially by whether your broker and/or his/her firm is immoral, amoral or moral. Each type is clearly differentiated from one another and you only want to give your money to the moral ones; the immoral and the amoral are to be avoided like the plague. We will now take a look at the differences between the three methods and what this could mean for your savings.
The Immoral, the Amoral and the Moral
Immoral brokers , fund managers and firms do not care about you at all. They want to make money out of you and not for you. They are motivated only by self-interest and regard clients as factors of production to be exploited, manipulated and bled. There can be no doubt that even though such people are only fit to be shunned, they abound in the industry, which has led to many mis-selling and mismanagement scandals, not to mention major crises in recent and less recent years. Some are in jail, and many others should be.
Amoral sellers are arguably not as bad, but they are bad enough. While not blatantly dishonest, they look after themselves and just do not bother about ethics. They keep to the letter of the law, but the spirit of the law is ignored. Therefore, they fulfill their regulatory obligations, but they do not look after your interests. They are unlikely to fleece you outright, but they can lose you a lot of money through indifferent management and bad advice.
Moral people are the only ones who deserve your money. They will treat your fairly, do their best for you and sell you only what they truly believe is what you want and what is suitable for you. Fortunately, there are such people out there, but the two groups of baddies and mega-baddies are there as well, and they all want your money. Only the moral ones have a conscience, and can be trusted and relied upon.
Why Is it Like This?
Human nature has produced all three types of morality for at least 2000 years, particularly in the context of money and wealth, and that is not going to change. All professions have their black sheep, but because the financial services industry deals only with money, it has more of these than elsewhere. Furthermore, due to the nature of the industry, there is a lot of money to be made from selling excessively risky and other forms of lousy products to the unwary; and the unwary have been around since the year dot.
This precarious scenario is exacerbated by the complexity of the industry; there are a plethora of local and international products. Furthermore, it is horrendously easy to present products so that they sound far better than they really are. People are also genuinely tempted by greed and offers that are too good to be true. This is an environment in which amorality and immorality thrive.
In fact, in this day and age, dishonest people with some financial or selling skills can make a fortune with minimal risk. Why pick locks, blow up safes or ride your horse into town with guns blazing, when you can put on a snazzy suit and pretend to be a gentleman, selling the investment of a lifetime?
SEE: 8 Ethics Guidelines For Brokers
How Do You Find the Moral Ones?
As is always the case, you need to be as educated as you can on investment issues, shop around and double check. I would also emphasize that there are other ways to spot what type of seller you are dealing with.
My experience is that you can tell a lot by observing how the brokers you deal with personally handle you and your money. If they seem to really want you to understand what you are getting, that is good. If they offer you a wide range of products and do not push just one or two, that is better. If the range includes various alternative risk-return combinations, some of which really do not earn so much for the seller, such as trackers, and funds with low or no up-front fees, then you could be dealing with a moral person.
Body language is also important. Keep an eye open for some telltale and quite reliable signs of lying. These include blinking, speech errors and hesitation, self-touching and doing weird things with one's hands. Jittery feet are supposed to be a reliable sign that you are dealing with the wrong moral type. Given the importance of body language, it is often safer to ensure that you deal with sellers personally, rather than just by email or on the phone.
In general, be perceptive and have a healthy level of cynicism. In this industry, cynicism is a good investment.
SEE: Choosing A Compatible Broker
The Bottom Line
What we have here are the good, the bad and the ugly aspects of the investment industry. These types are here to stay, but you can avoid the immoral and the amoral by being careful and watching for warning signs. Watch out for pushy selling, products or policies that you do not understand, and for patterns of behavior that just don't seem right. Make sure your money stays your own and grows over time. It can also help to understand some of the ethical issues your broker faces.
