In the past decade, many people visited financial advisers assuming they were dealing with members of a profession, but this was not the case.

Commissioner Kenneth Hayne highlighted the problem in his 2018 report on Australia’s Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry.

One of Commissioner Hayne’s key points was that although individual financial advisers considered themselves “professionals”, they were not truly members of a “profession” because too many of them did not act in the public interest, or according to a code of ethics.

Financial advisers, Commissioner Hayne found, had failed to adhere to one of the most essential hallmarks of a profession, the ability to enforce industry standards and regulations.

“History tells the story of an incomplete transformation – from an industry dedicated to the sale of financial products to a profession concerned with the provision of advice,” Commissioner Hayne said.

“I say ‘incomplete’ because I do not believe that the practice of giving financial advice is yet a profession.”

Professional ethics, he said, go beyond regulation, the law and training. Ethics commit members of a profession to a standard of behaviour in which adhering to the law is a given, competence is expected, and ethical behaviour is demanded.

A code of ethics is a defining characteristic

Commissioner Hayne’s comments are echoed in new research from Chartered Accountants Australia and New Zealand (CA ANZ), which found that a code of ethics is the most important and defining characteristic of any profession.

Earlier this year, CA ANZ surveyed two groups – members in Australia and New Zealand and the general public – as part of a research project into the changing nature of professions called The 21st Century Profession.

Asked to select from 12 options, and able to select as many as they believed appropriate, a code of ethics was cited by just under 90% of accountants as the most important characteristic of any profession, and by about 65% of the general public.

“Obviously experience and knowledge are a base but, in the end, it is clear that ethics give you the backbone to make the right decisions every time,” said one survey respondent.

“Obviously experience and knowledge are a base but in the end, it is clear that ethics give you the backbone to make the right decisions every time.”

Expert knowledge is also important

Expert knowledge was the second most selected characteristic, indicating that there is little point in engaging an expert if their insight is not founded on an ethical base. Unsurprisingly, the third and fourth ranked essential characteristics of a profession were also associated with the theme of ethics.

Both groups of respondents said that a profession should be highly trusted in addition to being disciplined and accountable.

“If the profession itself maintains a good reputation that is built upon robust requirements for entry and continuing membership, and a sound code of ethics, then trust in that profession will follow,” said another respondent.

Any perception that a profession or its members act in self-interest, whether grounded in reality or not, compromises the good reputation of that profession. One of the key benefits of transacting with a member of a profession, when alternatives exist, is their commitment to act ethically and in the public good.

The implications of the CA ANZ research are that while society places a value on expertise and education, it places an even greater value on ethical behavior. Expertise is a given, but on its own insufficient.

As one respondent to the survey put it: “Integrity and ethical behaviour are the keys to maintaining the value in any professional designation.

“Once the trust in these is lost the designation becomes meaningless.”

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