Ethics and Client Communication
The standard
The adviser is a fiduciary: act in the client's best interest with loyalty and care, ahead of the adviser's own commercial interest. Ethics questions are usually conflicts of interest in disguise.
Communication rules
- Never promise or imply guaranteed, assured or fixed returns.
- Present past performance with its period and a warning that it is not indicative.
- Show costs, risks and the downside, not only the upside.
- Use plain language and avoid jargon that hides risk.
- Do not mislead by omission; a material fact left out is still misleading.
- Keep records of advice: emails, written recommendations and suitability rationale.
- Protect client data; never use it for personal trading or share it without consent.
Conflicts
Disclose in writing any commission or inducement, ownership in recommended products, referral arrangements and outside business interests. Where a conflict cannot be managed, decline the engagement.
Vulnerable clients
Senior citizens, clients with low financial literacy and recently bereaved clients need clearer documentation, slower processes and a recorded rationale. Complaints must be acknowledged and resolved within stated timelines, with escalation to SEBI SCORES if unresolved.
Worked example
An adviser sends a mailer saying the equity plan has delivered 22 percent and will keep delivering 18 percent assured. There are two breaches: an assurance of return and a misleading extrapolation from past performance. The correction must show the period, the risks and the absence of any guarantee, in balanced language.
Traps
Believing disclosure alone cures a conflict. Giving informal verbal advice that is never documented. Recommending a product because a friend distributes it. Discussing one client's portfolio with another.