Reflection paper Essay Example | Topics and Well Written Essays - 750 words

Reflection paper - Essay Example In addition, such a culture will attract investors that keep the share price high thus protecting the business from takeover (The Times 100, 2002). The biggest challenge that financial planners are primarily faced with is selecting the mode of compensation, this is where financial planners are categorized into two, which are commission-based planners and fee-based planners. The main difference between the two is that commission-based planners are subject to a constant commission for every transaction, whereas fee -based planners are entitled to a commission based on the assets for which they have been made responsible. The ethical dilemma for commission-based planners arises from the temptation to generate additional transactions regardless of there being no actual sales done. This is because their income is independent of any gains made on the overall portfolio of a business. As for fees-based planners, their ethical dilemma stems from the fact that their income comes from their abi lity to grow an investment. This implies that they would be motivated to make use of aggressive investment strategies that may be unethical (Cussen, 2012). Therefore, it is evident that financial planners require a tool to guide their actions and develop a relationship of trust with clients. This is because they have to make their own benefits a secondary concern to that of clients. On the other hand, they are faced with responsibility of ensuring their clients make financially sound decisions regarding their investments rather than basing their decisions on emotions. In this case, the ethical dilemma arises where the financial planner has to insist on a particular investment choice, all for the benefit of the client, but in so far as, it does not come out as fear-induced. The financial planner has to illustrate to the client the benefits of an investment decision as realistically as possible without striking fear in them. Many investment companies have resulted in making their fina ncial planners sign a disclaimer in order to protect them from clients who may come up and say that they were not given sufficient advice regarding a particular investment choice (Cussen, 2012). Nevertheless, financial planners are bound to act according to the seven ethical principles established by Certified Financial Planner Board of Standards and the Financial Planning Association. They are Integrity, Objectivity, Competence, Fairness, Confidentiality, Professionalism and Diligence; therefore, upholding these principles will create a relationship of trust between financial planners and their clients. This is because the client will be assured that their best interests will be paramount to any procedures employed or proposals made. The client does have the burden of looking into a financial planner’s prior relationships with other clients in order to evaluate their performance properly and behavior (Gambone, n.d). There are ten must-do’s for developing a financial p lanning practice that include: Selecting a practice structure- this refers to a mode of operation which may either be a sole proprietorship, corporation or partnership; depending on the financial pla