24% of financial services pros believe unethical or illegal conduct is vital to success

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A survey of financial services professionals has found that almost a quarter believe that they need to break the rules in order to succeed. What does this say about the reputation of the finance industry?

The survey, which was carried out by Labaton Sucharow LLP, gained the opinions of 500 senior financial services professionals in the US and UK.

In addition to the 24% of respondents who believed that financial services professionals may need to engage in unethical or illegal conduct in order to be successful, 26% indicated that they had observed or had firsthand knowledge of wrongdoing in the workplace.

Worryingly, 16% of respondents said that they would commit a crime themselves in the form of insider trading – if they thought they could get away with it.

"When misconduct is common and accepted by financial services professionals, the integrity of our entire financial system is at risk," said Jordan Thomas, partner and chair of the whistleblower representation practice at Labaton Sucharow.

Other survey findings included:

  • 39% of respondents reported that their competitors are likely to have engaged in illegal or unethical activity in order to be successful;
  • 30% of respondents reported their compensation or bonus plan created pressure to compromise ethical standards or violate the law; and
  • 23% of respondents reported other pressures that may lead to unethical or illegal conduct.

"It is shocking that four years after the global economic crisis began there continues to be a fundamental lack of integrity in the financial services industry, “said Chris Keller, partner and head of case development at Labaton Sucharow.

How does the financial services culture in Australia compare to that of the US and UK? Are you under pressure to break the rules in order to meet targets? Join the debate by commenting below.

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Aussies don’t trust financial planners, but all is not lost

  • Alleycat on 29/08/2012 9:44:01 AM

    Who justifies poor or crooked behaviour.
    This kind of thing tarnishes everyone.
    A crook is a crook and unfortunately so long as we have human beings, who are far from perfect, no amount of legislation is going to get rid of them.
    Sorry but let's weed them out to protect first the clients and then ourselves

  • Keith L. on 24/08/2012 6:38:32 PM

    I don't believe the same degree of deliberate misconduct would be found in a similar survey in Australia but I am not so naive to believe it doesn't exist here either. The irony is that I expect much of any wrongdoing in Australia can be directly attributed to the unnecessary complexity, ambiguity and inconsistency of the regulatory framework.
    Many financial planners - and I confess to being one of them - were so concerned about the interpretation of the ASIC's early regulations that they were too frightened to write business in case they inadvertently infringed one of the rules carrying penalties potentially large enough to ruin ones business. It took some time for some in the industry to gain sufficient confidence to get back into the business of doing business.
    Those of us who have been in the industry for any length of time will remember the 2006 incident of AMP being accused by ASIC of infringements relative to super switching. AMP claimed compliance with the regulations but ASIC insisted that AMP had misinterpreted the rules thus forcing AMP to either take ASIC on in a legal challenge or take the multi million dollar cost medicine of an enforceable undertaking. I believe the industry would have been better off had AMP taken on the legal process as it would have exposed some of ambiguities and inconsistencies in the regulations and possibly been a less costly solution for AMP.
    Frustration often leads to temptation and when planners in the advice sector continually lose clients to industry funds for the simple reason that a new employer hands them a form for their "preferred" super fund with an implied consequence involving job security, it is hard for the new employee to insist of choice of funds. It is hard for advice industry planners to accept they have lost a client that may have taken 20 hours of regulated compliant effort to get on the books. This frustration is particularly pertinent when the client is given a roll-over form to make a full withdrawal from the plan advised on. When you are able to talk to the client the story often is that they don't want to create any upset with their new employer often accompanied by the comment that they need the job more than the insurance cover they are losing. I can understand but not condone a planner accepting such a client back without the full claptrap when the former client loses their job in a few months time or gets frustrated at the ineptitude of the new fund and is confident enough of their position to invoke the freedom of (superannuation) choice provisions.
    While the existing regulations are so complex and in some areas more idealistic than prescriptive, and while there is an inordinate difference in the treatment of one sector of the industry against another relative to penalties, obligations and subsequent costs, the temptation to reduce the severe tilt on the playing field by cutting corners will be ever present.

  • Innocent Observer on 21/08/2012 1:06:44 PM

    It would be interesting to see (a) what they define as senior financial services professionals, and (b) what they define as illegal or unethical conduct. In my experience those who behave illegally or unethically usually won't last long enough in a client-centric position (such as a financial adviser) to become "senior" anything. There are some exceptions, but generally news of bad advice travels a hell of a lot faster than news of good advice

  • Rob Smith on 21/08/2012 12:48:53 PM

    What a mis-nomer. How they can be called a financial services professional with an attitude like that!
    No wonder the world went to hell in a handbasket with the "Global financial Crisis". Heaven help their clients.

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