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Brian Odero
Professor Clemons
BUSI 1301
28 February 2019
Conflict of Interest
Summary:
According to Frank Bearden in the Journal of Financial Planning, conflict of interest is
likely to impair professional judgement and as a result work against the best interest of
the client. Conflict of interest can affect both the professional and the client in different
ways. Bearden recommends that a financial planner or any other professional should
think about conflict of interest practically, as well as theoretically. By doing so a financial
planner or a professional will be able to avoid situations that may lead to a conflict of
interest.
Discussion:
This article covers a topic that is presented in the section of the text titled “Ethics and
Social Responsibility in Business.” (Pride, Hughes, and Kapoor Ch. 2-2c). Every
profession has its own code of ethics. In the article, CFP Board’s Code of Ethics and
Standards of Conduct, effective October 1, 2019, under Duty Owed to Clients, has
Section 5 dedicated to disclosing and managing conflict of interest.
Conflict of interest is unlike a common interest which is not so strong and can be
resisted. It is much stronger and so it is very unlikely to be resisted. As a result, it is
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most likely to impair professional judgement and in return harm the client since the
professional will not be looking out for his/her best interest. When determining conflict of
interest; you look at the strength of the interest, the resulting distraction, and the quality
of professional judgement exercised on behalf of the client.
From the example in the article of the financial planner who has his business partner as
his client, we see three risks stemming from conflict of interest. The first one is the risk
of losing financial stability posed to the family of his client in the event of the death of his
client. Second risk is posed to the financial planner who compromises his professional
integrity as a result of the conflict of interest. The financial planner is also at risk of
facing litigation and possible loss of his professional credentials if an unexpected death
occurs to his client. The damage from a conflict of interest can be practical as well as
theoretical.
Student Opinion:
“Conflict of interest results when a businessperson takes advantage of a situation for his
or her own personal interest rather than for the employer’s interest.” (Pride, Hughes,
and Kapoor Ch. 2-2c) As a professional it is always a rule of thumb to safeguard the
best interests of the client. In a professional situation your personal interest should
come second to the interests of your client.
Professionals should apply client rights in all professional dealings, in their respective
disciplines in order to avoid situations that may lead to conflict of interest. “For example,
the Securities and Exchange Commission charged a Houston investment advisory firm
of fraud because the Robare Group, Ltd. failed to notify clients of mutual funds that it
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recommended, that it was receiving compensation from the broker offering the mutual
funds.” (Pride, Hughes, and Kapoor Ch. 2-2c)
All in all, a professional should always strive to work in the best interest of their client.
They should work to weed out conflict of interest at the earliest onset. If a professional
finds out that he/she is too involved in the situation, it is wise for them let another trusted
professional with “clean hands” handle the matter.
Work Cited
Bearden, Frank. Journal of Financial Planning. Sep2018, Vol. 31 Issue 9, p32-33. 2p.
https://ezproxy.ctcd.edu:2102/ehost/pdfviewer/pdfviewer?vid=2&sid=2f3f593133d8-4c7f-9dd0-16f1142e8a8a%40sdc-v-sessmgr05
Pride, Hughes, and Kapoor. Foundations of Business, Bundle/eBook/Cengage
Unlimited,6th, Cengage, Ch. 2-2c.