Edinburgh advice to retail clients. This topic is

Edinburgh Napier Business School
Financial Services D/L

Dissertation Proposal

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Professionalism & Ethics within Financial Services; The factors that influence our actions.

This study investigates the current factors that may be influencing the ethical decision making of financial planners in the provision of financial advice to consumers.

Name: Steven Watson


Matriculation Number: 40293492

Date submitted: 13/04/2018

Dissertation proposal word count: 3373


1 Title

2 Introduction
2.1 Introduction
2.2 Reasons for this research

3 Research Aim

4 Research Objectives

5 Literature review

6 Research Methods
6.1 Overview
6.2 Primary Research
6.3 Potential Limitations

7 Timeline

8 References

1 Title

Professionalism & Ethics within Financial Services; The factors that influence our actions.

2.1 Introduction

This study investigates the factors that may influence the ethical decision-making of financial planners whilst providing financial advice to retail clients.

This topic is significant both in academic and social perspectives. From an academic perspective this research will attempt to demonstrate that the reasons why people make differing ethical decisions in their working practices is a complex one. The aim is to show that ethical decision making may be able to be predicted in some way by a number factors including individual, situational and organisational characteristics.
From a social perspective, financial planning is becoming more and more relevant for achievement of personal goals such as retirement and ensuring financial stability through our lifetimes.
The cessation of defined benefit pension schemes, an ageing population and ever increasingly debt laden public linked with political and economic pressures as the government cannot continue to fund certain aspects which were once considered a given, add to this importance.

Secondly, this study may help to contribute to training of Financial Planners, CPD programs and an overall increase of ethical behaviour cognitive reasoning understanding with members of the Financial Services community.

What is meant by being ‘professional’? What distinguishes a profession from a business or an industry? What is the relationship between ethics and professionalism?

Traditionally, society has recognised different categories of professional people such as lawyers, doctors and engineers. Financial planning is a relatively new profession but one that is increasingly defining itself in professional terms.
Professionalism is about standards of conduct: consistent practice, attitude and behaviour in providing services and advice to clients.
Above all, there is an underlying assumption that core ethical values and principles that have been developed and recognised over a long period of time will underpin all professional dealings and relationships.

Why then would there be such a negative perception of financial planners and the finance sector as a whole?

When scandals do take place inevitably it is the end consumer who is left disadvantaged and/or out of pocket. Cases are well publicised in the media and fingers are pointed at financial planners for abusing their duty of care and utilising the asymmetrical information within the financial services industry to their advantage. Despite a very small percentage of professionals being involved, financial planners as a whole are tarred with the same brush and branded as unethical and lacking of morals and virtues.

Financial planners are expected to act in a professional and ethical manner whether this be innate or learned through their professional training, therefore we have to ask why some do not;
• Is this due to an overall lack of education within the industry itself?
• Are financial services companies only out for themselves and inherently unethical in their practices?
• Is this due to peer pressure from colleagues and senior management?
• Can your stance on professionalism and ethics be taught or picked up from experiences?

2.2 Reasons for the Research

In a broader sense, this study attempts to provide a greater understanding of the ethical decision making of financial planning participants within the UK financial services organisations.
More specifically, this study investigates the influences of individual, situational and contextual factors on the ethical decision making of the respondents.
Whilst transition to the new FCA/PRA regime completed on 1 April 2013, it is argued that the legislative regime has significant gaps which could be filled by non-regulatory ethical based frameworks.
There is current public perception that despite this new regime, financial planners are unethical and incompetent, with their professional role being shaped by scams and scandals such as the miss-selling PPI and interest rate hedging products.
These perceptions have also been exacerbated by a spate of corporate and financial scandals globally including the sub-prime CFO markets in the US and LIBOR fixing scandal in the UK.
Financial planners deal with a large range of ethical dilemmas in their daily practices which often involve multiple stakeholders, interests and values in conflict (Smith, Armstrong & Francis 2007).
The relationships planners have with their clients and their ethical frameworks is therefore pivotal to the ability of the financial planner to provide a professional service (Smith 2006).
In summary, this study is designed to enhance knowledge in particular areas of applied professional and business ethics and, in doing so, aims to reduce the ethical, legal and regulatory risks involved in the provision of financial advice to retail clients.

3 Research Aim

The general aim of this research is to enhance the understanding of the ethical decision making of UK based independent financial planners.

4 Research Objectives

1. Critically analysing prior research and literature regarding the individual attributes (individual demographic factors and cognitive ethical reasoning) that influence the ethical decision making of financial planners in the provision of financial advice to retail clients.

2. To test the perceptions of the public with regards to financial planners and recent well publicised scandals within financial services organisations by conducting;
a. Online quantitative survey
b. Structured qualitative interviews

3. To determine the situational and contextual factors that influence the decision making of financial planning participants by again conducting;
a. Online quantitative survey
b. Structured qualitative interviews

4. Provide recommendations on how a better understanding of contextual ethical reasoning and what drives our ethical decision making can benefit companies by helping to train their advisors, implement ethical practices and monitor ongoing issues and trends towards good customer outcomes.

Research Question 1

What are the primary types of unethical behaviours exhibited by financial planners?

Research Question 2

What are the perceptions of financial planners of current ethical issues facing them?

Research Question 3

Are there statistically any significant relationships between individual attributes (age, sex, qualification level and years of experience) and the cognitive ethical reasoning?

Research Question 4

Are there statistically any significant relationships between the remuneration source and the role of the respondent in cognitive ethical reasoning?

Research Question 5

Is there a statistically significant relationship between perceptions of ethical culture within financial services organisations and cognitive ethical reasoning scores?

Part two being a structured survey directed to members of the public to gain an insight into their opinions.

The suggested order in which the research is to be structured is as follows:

• Undertake a critical literature review to:
– Define what is meant by the word ‘Profession’ and ‘Professional Behaviour’
– Define what is meant by the word ‘Ethics’ and ‘Ethical Behavior’
– Identify personal ethics and research whether ethical behaviors can be learnt
• Research if Financial Planners behave in unethical ways due to:
– Peer pressure
– Company environment
– Personal morals and virtues
– Personal gain
– They are presumed to be unethical by the public
– Education
• Analyse responses from survey to:
– Determine the effectiveness of the survey
– Determine whether all target groups have been represented and identify those which have not and why
– Ascertain the usefulness of data produced
– Identify correlations e.g. socioeconomic, age, professional groups etc
• Identify suitable persons for interviews from questionnaire respondents who are prepared to answer further questions
– Undertake interviews
– Prepare transcripts of interviews
– Obtain approval of transcripts from interviewees
– Analyse interviews
• Discuss findings from primary research
• Present findings of the primary and secondary research and make interpretations based on the findings of as to what influences behaviors
• Produce abstract

5 Literature review

There are copious theories relating to the study of ethics, usually divided into two main categories, namely theoretical and applied ethics.
Theoretical ethics is the study of ethical language and its use. (Kitchener 2000).
In contrast, Almond (1995) contends that applied ethics involves the use of principles and insights to resolve specific moral issues. Applied ethics also includes the study and evaluation of moral beliefs and actions within a given professional setting. (Kitchener 2000).

To ensure individuals can choose between moral options, different cultures have developed rules or frameworks to be applied (Hofstede 1980, Hofstede & Bond 1998). There are a number of these ethical frameworks which make up the research of this dissertation as follows;

Utilitarianism seeks to maximise the greatest good for the greatest number of people. It has its origins in the 1st century writings of Plato (Shultz & Brender-Ilan 2004) and the 19th century writings of Bentham (1969) and John Stuart Mill (Mill, Bentham & Ryan 1987). Mill (Mill, Bentham & Ryan 1987) has proposed that utilitarianism is based on the principle that actions are just if they promote happiness and wrong if they produce pain. Morality is therefore based on the consequences of the person’s actions and its effect on society as a whole (Shultz ; Brender-Ilan 2004). This theory suggests that decisions made in a financial planning context should take into account the greatest good for the greatest number of people effected.

Virtue ethics is usually associated with Aristotle (Shultz ; Brender-Ilan 2004). Virtue ethics means choosing a course of action that ensures that a person has exhibited good character or is a good person.

Egoism is an ethical theory which is relevant to this piece; However in contrast to virtue ethics, this theory shows acceptable actions that maximize the person’s self-interest and where moral rules are irrelevant (Shultz & Brender Ilan 2004). In an ethical decision-making situation, an egoist will choose the alternative where the outcome contributes most to their self-interest (Ferrell, Fraedrich & Ferrell 2002). Ethical egoists will consider other people’s interests only when it suits them, such as to avoid punishment (Beauchamp ; Baine 2004; Van Gramberg ; Menzies 2006).

Ethical egoism may be associated with current financial planning compensation structures and in particular where there is an ethical dilemma when a planner’s remuneration source/payments based on the sale of financial products comes before the interests of the client.

It is important to distinguish the differences between ethics and the law, given the overlap between legal, professional and ethical obligations associated with financial planning and the provision of financial advice. Ethics and the law are different. Coady and Sampford (1993) have argued that the law is frequently concerned with setting a minimum standard of behaviour that may not be agreeable to the majority of the population. For an example doing the bear minimum from legal perspective in event of financial claim without going ‘over and above’ to put the client first.

The literature review has identified that ethical decision-making and ethical behaviour in business is influenced by numerous individual, situational and contextual factors and the research is to delve into this further by contrasting the different ethical models within a financial planning environment.

6 Research Methods

6.1 Overview

The research design utilizes both quantitative and qualitative research methods adopted to explore the research questions. It recognizes that there are numerous predictors of ethical decision making of individuals within organizations (Suzuki & Knudson, 1989) and incorporated a measurement of the relationship between the different individual, situational and contextual constructs identified.

The research is to be conducted in five stages to ensure it is undertaken in a sequential and ordered manner as highlighted in Figure 1 below.

Figure 1: The research stages to be adopted for the study.

6.2 Primary Research

Primary research will be carried out in the form of a survey aimed to analyse how different planners and individuals from different cross sections of society and education status would respond to ethical dilemmas and to show whether professionals are more ethical then non-professionals.
The survey will also reflect how individuals and planners themselves perceive the financial planning industry as a whole and attempt to show whether scandals take place due to a lack of principles inherit within us and whether ethics can be taught.

The survey is to be presented to the largest cross section of society to maximise the impartiality of the data. An invitation is to be extended to 150+ members of various financial services discussion groups, of which the researcher is also a member, and as many of the members of public, financial advice recipients or not. Current and past clients of my employer will also be invited, with the authorisation of the licensee, will also be sought.

In return for participation, a summary of the aggregated results will be offered to the groups.

A survey is used to collect data for this research project since this project is seeking to obtain a contemporary picture across all of society. Reminders will be sent to non-respondents to increase the response rate.

Although it is not possible to provide a detailed questionnaire at this stage, a general outline of the questionnaire is provided below.

Personal information
• Gender
• Occupation/Industry sector
• Full time/part time
• Age
• Educational standard attained
• Household salary

Professionalism and Ethics
• Do you know what the word professionalism means
• Do you know what the word ethics means
• Do you feel professionals in a position of trust should have higher levels of professionalism and show higher levels of ethical behaviour
• Ethical dilemma Question #1 – Withholding information
• Ethical dilemma Question #2 – Confidentiality
• FPSB* Financial Planner Code of Ethics and Professional Responsibility
o Principles 1-8. Please rank these in order of importance with 1 being very important and 8 being not so important
• When you think about Financial Planners, how would you describe them?
o Honest
o Trustworthy
o Professional
o Confidential
o Scandals
o Other
• Have you seen stories about scandals within the financial services industry
• Do you feel scandals take place due to a lack of professionalism and ethics
• How ethical do you feel you are on a scale of 1-10. Please expand why you feel this way
• What do you feel are the factors that drive unethical behaviour within the Financial Services sector
• Do you think that ethics can be taught

The questionnaire will be designed to obtain responses from all users and most questions will be single or multiple response questions with further fields to add commentary if necessary to make the questionnaire user friendly.
Respondents will also be asked if they are prepared to answer further questions.

Selected respondents who are prepared to answer further questions will be contacted to obtain a greater understanding of their views. It is likely that these discussions will take place via telephone or email due to time constraints costs associated with face to face interviews. The interviews will be based on their responses to the questionnaire.

6.2 Potential Limitations

All surveys have potential drawbacks and limitations.
There may be limitations due to time and response rate. Time constraints may lead to a narrower field of and a low response rate may bring into question the validity and reliability of the survey.
Another potential limitation will be if the individuals answer the survey in a hurry and the answers given not correctly reflecting their true opinions. Every effort will consequently be made to ensure a good response rate by keeping respondents aware of timescales, development of a short, user friendly questionnaire and by the use of personal reminders.

While it is intended to undertake interviews to obtain more insight into the use of sales variances in practice, this is dependent on respondents being prepared to answer further questions.

7 Timeline

Proposal hand-in 1 day(s) 19/04/2018 20/04/2018
Receive feedback 7 day(s) 19/04/2018 26/04/2018
In-depth literature review 25 day(s) 27/04/2018 21/05/2018
Design pilot and trail 3 day(s) 22/05/2018 24/05/2018
Design questionnaire 3 day(s) 25/05/2018 28/05/2018
Set up online survey and distribute 2 day(s) 29/05/2018 31/05/2018
Response time 14 day(s) 1/06/2018 14/06/2018
Draft literature review 1 day(s) 15/06/2018 16/06/2018
Consider, set up and complete interviews 12 day(s) 17/06/2018 29/06/2018
Analyze collected data 14 day(s) 30/06/2018 13/07/2018
Discuss findings 10 day(s) 14/07/2018 24/07/2018
Complete remaining sections 7 day(s) 25/07/2018 31/07/2018
Draft 1 day(s) 1/08/2018 2/08/2018
Check each section 5 day(s) 3/08/2018 7/08/2018
Write abstract and references 3 day(s) 8/08/2018 10/08/2018
Prepare for hand in 7 day(s) 11/08/2018 17/08/2018
Draft 1 day(s) 18/08/2018 19/08/2018
Wait for feedback 21 day(s) 20/08/2018 9/09/2018
Edit for final submission 7 day(s) 10/09/2018 16/09/2018
Final submission 1 day(s) 17/09/2018 18/09/2018

7.1 Gantt-Chart

8 References

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