Exploring professionalism and business ethics of the financial advisors and compliance officers in Durban.

Abstract

The objective of this exploratory qualitative study was to understand the nature of professionalism and business ethics of financial advisors and compliance officers in Durban, KwaZulu-Natal in South Africa. This qualitative study was conducted using qualitative detailed interviews with 12 experienced financial advisors and compliance officers in Durban. These 12 financial advisors and compliance officers were selected using judgemental or purposive sampling technique to explore the common types and nature ofunethical behaviours in their daily activities and their perceptions regarding existing ethicalchallenges they face in their responsibilities and organisations. Semi-structured interviews were utilised to gather in-depth data while thematic analysis was utilised to identity common themes amongst the participants with regard to the type and nature of common unethical behaviours, perceptions of existing ethical challenges and key elements which should constitute an effective ethical decision-making framework for financial advisors. First, the results of this study reveal that the common types and nature of unethical behaviours of financial advisors in Durban are product pushing, giving advice without holistic financial understanding of the client grounded in ethical conscience, unethical leadership exerting incessant pressure on financial advisors to sell at any cost or perish, and the failure of financial advisors to do due diligence and disclose fees and charges applicable to an investment. Second, the study found that the scope and variety of perceptions of financial advisors and compliance officers regarding existing challenges which they face in their responsibilities and organisations relate to conflict between personal interest and professional duty, continued distrust of financial advisors and the necessity to adhere to professional standards, exploiting clients’ lack of financial knowledge and awareness of ‘bad eggs’ and investing client funds without proper understanding of client goals and/or in breach of regulatory requirements. Lastly, the study proposes that the constitutive elements of a framework for effective and ethical decision making by financial advisors need to embrace treating customers fairly, demonstrate a financial advisor’s analytical mind, manage client risk assessment, build ethical relationships of trust, and become a technologically savvy financial advisor. Given the above findings, the study has proposed a framework of ethical decision making for effective financial advisors. The study concludes that the ethical and professional behaviour of financial advisors requirenot only organisational culture change modelled and promoted by ethical leadership, but also the pursuit of ethical processes of setting performance targets, rewards, recruitment and adequate supervision at both the employee and industry regulatory levels to reinforcestandards. Small sample size and exclusive focus on financial advisors and complianceofficers are the key limitations of this study; the results are not generalisable but can be transferred to a similar context. The areas for future research are highlighted in this study.