IDEAS home Printed from https://ideas.repec.org/a/sae/ausman/v47y2022i3p401-422.html

Ethics in financial planning: Analysis of ombudsman decisions using codes of ethics and fiduciary duty standards

Author

Listed:
  • Daniel W Richards

    (School of Administrative Studies, York University, Toronto, ON, Canada)

  • Abdullahi D Ahmed
  • Kenneth Bruce

    (School of Accounting, Information Systems and Supply Chain, RMIT University, Melbourne, VIC, Australia)

Abstract

Scandals show that ethics is an important topic in financial planning. Our research analyses 212 financial ombudsman decisions (2013–2018) to understand the nature of financial planning misconduct in complaint decisions. We develop a coding structure to ascertain what professional conduct involves and then use content analysis and cluster analysis to identify the aspects of professional conduct occurring in these misconduct decisions. Diligence, acting in the client’s best interest and having no reasonable basis for advice are interconnected elements in over half of these decisions. Secondary elements are misleading statements, conflicts of interest and disclosure. Analysis of decisions involving fiduciary duty showed that financial planners failed to ascertain a client’s circumstances and did not form advice based on their client’s information. As financial planning professionalises, future research, financial planning education, policy and practice should address these issues. JEL Classification: D14, G20, G50

Suggested Citation

  • Daniel W Richards & Abdullahi D Ahmed & Kenneth Bruce, 2022. "Ethics in financial planning: Analysis of ombudsman decisions using codes of ethics and fiduciary duty standards," Australian Journal of Management, Australian School of Business, vol. 47(3), pages 401-422, August.
    • Handle: RePEc:sae:ausman:v:47:y:2022:i:3:p:401-422
    DOI: 10.1177/03128962211022568
    as

    Download full text from publisher

    File URL: https://journals.sagepub.com/doi/10.1177/03128962211022568
    Download Restriction: no
    File URL: https://libkey.io/10.1177/03128962211022568?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Calcagno, Riccardo & Giofré, Maela & Urzì-Brancati, Maria Cesira, 2017. "To trust is good, but to control is better: How investors discipline financial advisors’ activity," Journal of Economic Behavior & Organization, Elsevier, vol. 140(C), pages 287-316.
    2. Schwartz, Mark S., 2013. "Developing and sustaining an ethical corporate culture: The core elements," Business Horizons, Elsevier, vol. 56(1), pages 39-50.
    3. Monti, Marco & Pelligra, Vittorio & Martignon, Laura & Berg, Nathan, 2014. "Retail investors and financial advisors: New evidence on trust and advice taking heuristics," Journal of Business Research, Elsevier, vol. 67(8), pages 1749-1757.
    4. Paul Chen & Martin Richardson, 2018. "Conflicted financial advice: disclosure revisited," Applied Economics Letters, Taylor & Francis Journals, vol. 25(12), pages 826-829, July.
    5. William Martin, 2009. "Socially Responsible Investing: Is Your Fiduciary Duty at Risk?," Journal of Business Ethics, Springer, vol. 90(4), pages 549-560, December.
    6. Aaron Bruhn, 2019. "Relying on the heuristic of trust: a case study," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 59(S1), pages 333-357, April.
    7. Muel Kaptein & Mark Schwartz, 2008. "The Effectiveness of Business Codes: A Critical Examination of Existing Studies and the Development of an Integrated Research Model," Journal of Business Ethics, Springer, vol. 77(2), pages 111-127, January.
    8. Matt Statler & David Oliver, 2016. "The Moral of the Story: Re-framing Ethical Codes of Conduct as Narrative Processes," Journal of Business Ethics, Springer, vol. 136(1), pages 89-100, June.
    9. Ahmed, Shakeel & Bangassa, Kenbata & Akbar, Saeed, 2020. "A study on trust restoration efforts in the UK retail banking industry," The British Accounting Review, Elsevier, vol. 52(1).
    10. Aaron Bruhn, 2019. "Trust in, trust out: a real cost of sudden and significant financial loss," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 59(S1), pages 359-381, April.
    11. Guido Palazzo & Lena Rethel, 2008. "Conflicts of Interest in Financial Intermediation," Journal of Business Ethics, Springer, vol. 81(1), pages 193-207, August.
    12. James Angel & Douglas McCabe, 2013. "Ethical Standards for Stockbrokers: Fiduciary or Suitability?," Journal of Business Ethics, Springer, vol. 115(1), pages 183-193, June.
    13. Angelova, Vera & Regner, Tobias, 2013. "Do voluntary payments to advisors improve the quality of financial advice? An experimental deception game," Journal of Economic Behavior & Organization, Elsevier, vol. 93(C), pages 205-218.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Daniel W Richards & Chris Robinson & Gizelle D Willows, 2025. "Professionalisation of financial planning in Australia, Canada, and South Africa," Australian Journal of Management, Australian School of Business, vol. 50(4), pages 1087-1103, November.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. James Angel & Douglas McCabe, 2013. "Ethical Standards for Stockbrokers: Fiduciary or Suitability?," Journal of Business Ethics, Springer, vol. 115(1), pages 183-193, June.
    2. Bram Constandt & Els Waegeneer & Annick Willem, 2019. "Ethical Code Effectiveness in Football Clubs: A Longitudinal Analysis," Journal of Business Ethics, Springer, vol. 156(3), pages 621-634, May.
    3. Els Waegeneer & Jeroen Sompele & Annick Willem, 2016. "Ethical Codes in Sports Organizations: Classification Framework, Content Analysis, and the Influence of Content on Code Effectiveness," Journal of Business Ethics, Springer, vol. 136(3), pages 587-598, July.
    4. repec:mth:ijafr8:v:9:y:2019:i:1:p:15-37 is not listed on IDEAS
    5. Cruciani, Caterina & Gardenal, Gloria & Rigoni, Ugo, 2021. "Trust-formation processes in financial advisors: A structural equation model," The Quarterly Review of Economics and Finance, Elsevier, vol. 82(C), pages 185-199.
    6. Steffen Westermann & Scott J. Niblock & Jennifer L. Harrison & Michael A. Kortt, 2020. "Financial Advice Seeking: A Review of the Barriers and Benefits," Economic Papers, The Economic Society of Australia, vol. 39(4), pages 367-388, December.
    7. Zongrun Wang & Mei Yang, 2020. "Effective allocation of financial services intensity and its impact on channel competition," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 41(8), pages 1473-1492, December.
    8. Muel Kaptein, 2015. "The Effectiveness of Ethics Programs: The Role of Scope, Composition, and Sequence," Journal of Business Ethics, Springer, vol. 132(2), pages 415-431, December.
    9. Stephanie Kelley, 2022. "Employee Perceptions of the Effective Adoption of AI Principles," Journal of Business Ethics, Springer, vol. 178(4), pages 871-893, July.
    10. Ismayilov, Huseyn & Potters, Jan, 2013. "Disclosing advisor's interests neither hurts nor helps," Journal of Economic Behavior & Organization, Elsevier, vol. 93(C), pages 314-320.
    11. Tyson Lamarra & Aaron Bruhn & Michael Miller, 2023. "Stochastic modelling of the home equity access scheme," Australian Journal of Management, Australian School of Business, vol. 48(3), pages 652-677, August.
    12. Özalp Özer & Upender Subramanian & Yu Wang, 2018. "Information Sharing, Advice Provision, or Delegation: What Leads to Higher Trust and Trustworthiness?," Management Science, INFORMS, vol. 64(1), pages 474-493, January.
    13. Raymond O. S. Zaal, 2011. "Reinforcing Ethical Behavior through Organizational Architecture: A Hypothesized Relationship," Chapters, in: Killian J. McCarthy & Maya Fiolet & Wilfred Dolfsma (ed.), The Nature of the New Firm, chapter 2, Edward Elgar Publishing.
    14. Reiter-Gavish, Liron & Qadan, Mahmoud & Yagil, Joseph, 2021. "Financial advice: Who Exactly Follows It?," Research in Economics, Elsevier, vol. 75(3), pages 244-258.
    15. Juliana Toro-Arias & Pablo Ruiz-Palomino & María Pilar Rodríguez-Córdoba, 2022. "Measuring Ethical Organizational Culture: Validation of the Spanish Version of the Shortened Corporate Ethical Virtues Model," Journal of Business Ethics, Springer, vol. 176(3), pages 551-574, March.
    16. Calderón Reyes & Ferrero Ignacio & Redin Dulce M., 2013. "Ethical codes and corporate responsibility of the most admired companies of the world: Toward a third generation ethics?," Business and Politics, De Gruyter, vol. 14(4), pages 1-24, January.
    17. Ingo Winkler, 2011. "The Representation of Social Actors in Corporate Codes of Ethics. How Code Language Positions Internal Actors," Journal of Business Ethics, Springer, vol. 101(4), pages 653-665, July.
    18. Alex W. Macfarlan & Cathleen D. Zick, 2020. "Financial advisor titles: Informational complexity and the role of regulatory simplification," Journal of Consumer Affairs, Wiley Blackwell, vol. 54(2), pages 801-809, June.
    19. Antonio Díaz & Francisco Jareño & Eliseo Navarro, 2022. "Yield curve data choice and potential moral hazard: An empirical exercise on pricing callable bonds," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 27(2), pages 2124-2145, April.
    20. Baeckström, Ylva & Marsh, Ian W. & Silvester, Joanne, 2021. "Variations in investment advice provision: A study of financial advisors of millionaire investors," Journal of Economic Behavior & Organization, Elsevier, vol. 188(C), pages 716-735.
    21. Forsyth, Donelson R. & O'Boyle Jr., Ernest H., 2011. "Rules, standards, and ethics: Relativism predicts cross-national differences in the codification of moral standards," International Business Review, Elsevier, vol. 20(3), pages 353-361, June.

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • G50 - Financial Economics - - Household Finance - - - General

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:sae:ausman:v:47:y:2022:i:3:p:401-422. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: SAGE Publications (email available below). General contact details of provider: http://www.agsm.edu.au .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.