A Tale of Many Blind Spots: A Case Study on Ethical Decision Making

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Larry was a financial advisor. He had worked in the industry for ten years and had completed a professional qualification in financial planning.

As one of three partners in his firm, Larry had a reasonable degree of influence on the way business was undertaken. While his fellow partners did not share his own commitment to following Jesus, they did have a strong desire to deal honestly and ethically. Larry considered them people of integrity.

For the past two years Larry had been meeting with four other men from his church for breakfast once a fortnight. Their conversation revolved round the challenges they found in their work environments. They shared about how their faith was working out, though most of the discussion and prayer focused on opportunities to witness and to be people of honesty and integrity.

Recently, Larry had been sharing about the difficulties he was encountering because of the recent downturn in investor confidence – the result of a string of finance-company failures, and losses amongst managed funds. What especially upset Larry was the negative press that financial advisors had received as a result.

Larry described to the others his sense of hurt that all advisors have been typecast so badly. “I consider myself a person of high integrity,” he said. “I’m scrupulously honest and would never attempt to mislead my clients. I treat my customers with the utmost care and genuinely try to do the very best for them. And I think I can reasonably claim that I have good skills and expertise. It’s unfair that those of us in the industry who operate ethically get tarred with the same brush as the irresponsible ones. I mean, I know there are some ratbags in financial advising, but why do the rest of us get slated for their stupid actions?”

The others in the group could feel for Larry. They genuinely thought him a great guy, with a real heart for people and a desire to serve God. So they affirmed him and let Larry know of their confidence that he really was an advisor of integrity and honesty.

A couple of weeks later, Larry was approached by Mark – a friend at church – wanting to know whether he would be willing to do something for some neighbours of his. Mark was looking for someone with financial skills to sit down with these people and help them develop a plan to ease some of the enormous financial pressure they were finding themselves under. Larry agreed to an initial meeting with Kate and Dave, a couple in their thirties, with three young children (two under 5).

* * *

At the meeting Dave outlined their precarious financial situation. Their only assets, he explained, were a secondhand car and the household belongings in their rented house. They had no savings; on the contrary, they had a substantial personal loan of $35,000.

Four months ago Dave had been made redundant from his job as a machine operator at the local sawmill. In spite of searching vigorously for another position, Dave failed to secure fulltime work, though he did manage to pick up irregular casual jobs such as mowing lawns, gardening and handyman tasks.

As a result of the significant drop in income and the pressure of paying the bills, their loan repayments had bounced for the past four weeks. The finance company they owed the money to had threatened to push him into bankruptcy if the missed repayments weren’t paid within a week. Kate and Dave attempted twice to explain their situation to the company. They asked for a meeting to discuss an alternative plan so they could manage the situation while Dave was still without a fulltime job. But the company had not been interested. They just wanted their money.

Larry asked the couple how much the repayments were and what the interest rate was. Kate replied that they paid $292 per week and the interest rate was 29%. (The interest component of the loan was currently $195 per week.) That was on top of their weekly rent of $300 and living costs of around a further $300 per week (power, phone, car, food, insurance, clothes, school costs, etc.). All told, Kate explained, they had weekly expenses of just under $900 per week. But with Kate’s part-time job and Dave’s irregular casual work, topped up by some WINZ payments and family support, they had been finding themselves well short of this.

Larry asked how they managed to incur such a debt in the first place. Dave explained about the failed business venture he attempted three years earlier. When it didn’t work out they closed it down as soon as possible and Dave returned to a regular paying job. But by then the damage was done. The bills kept coming in – mainly from supply firms they owed. Soon they were up to their neck in accounts, well beyond what the credit card could handle. A friend of theirs mentioned this finance company and recommended they see if they could consolidate their debt to manageable repayments and pay their creditors out.

As Larry listened to their story he was overwhelmed by anger as he heard the account (admittedly one side of the story) of the treatment the young couple had received from the finance firm, even though they’d tried to be responsible and front up to the missed payments. When Larry asked them the name of the firm they replied, “Genoa Finance”.

Larry’s face turned white. Genoa Finance was a company he regularly recommended to his clients. They were a consumer finance company that had an excellent reputation and paid a healthy 10.25% interest rate on secured debentures.

* * *

At the next breakfast meeting Larry recounted his experience with Kate and Dave (being careful not to give too many details away and betray confidentiality). He was still attempting to process his mixed feelings and what this might mean for him and his business.

Fred asked Larry whether he was aware of the interest rates and penalty clauses Genoa charged. Larry replied that he had a vague knowledge but had always accepted Genoa’s explanation that with consumer finance the default rate is high, with little or no security, and therefore such rates are justified. Otherwise companies such as theirs could not afford to loan money to the kind of people they do. Plus, Larry noted, he knew for a fact that the directors of Genoa were honest and clean operators, who prided themselves on running a professional ship.

“So what’s changed for you, Larry?” asked Fred.

“I guess it’s just that until Saturday I’d never really met anyone who was on the other side of the equation, so to speak. It kind of personalized it for me. I mean, Kate and Dave are real people. Sure, part of me thinks that they only have themselves to blame for getting into this situation. But there’s another part of me that feels angry about the unjust way they are being dealt with. The repayments are crippling them.”

As the conversation continued on, Larry was already mulling over some of the questions he and his partners would need to answer in the next little while. Questions such as:

  • Do we believe there is any ethical legitimacy to charging 29% interest (let alone the high penalty rates), given that inflation is running around 3% and bank personal loan rates are around 14%?

  • Is it not questionable morally that Genoa lends to such desperate people as Kate and Dave, knowing that the crippling rates and penalty charges are likely to leave them even more in debt than when they started?

  • What might some of our clients think about their investment with Genoa if they knew the effect the company’s practices are having on people such as Kate and Dave?

  • How can we support and promote a finance company that operates this way?

* * *

That night Larry hardly slept. He kept wondering why he had never thought about these questions before. Here he was, a financial planner, and he’d never really considered the consequences that the actions of a loan company could have on those it dealt with. How could that have happened?

On Monday Larry decided to formulate a plan to meet with Genoa’s CEO and ask for some specific details about their operation – questions that would go far beyond the normal balance sheet ones they usually considered when determining whether to recommend a company to their clients. These questions were of an entirely different type, but they needed to be asked and he felt determined to get some solid answers

However, as the month wore on Larry began to be nagged by another question. This one went much wider and deeper than the specific ones he had been asking of Genoa. And it worried Larry. It went something like…

“If I’ve operated as a financial advisor for over ten years and never before had cause to ask the kind of questions I have these past few weeks, what other areas of my business – or at least the industry I’m part of – might I be unaware of? In fact, could it be that there are other practices and attitudes that are just assumed by us financial planners as being acceptable and normal, but which might be questionable morally?”

* * *

Larry, being his usual transparent self, raised all this at the next breakfast gathering. The others were uncertain what he was saying so there was an uneasy silence to begin with. Simon spoke first. “Is that a rhetorical question, Larry, or are you asking us if we’re aware of other areas of the financial planning industry which might be questionable ethically?”

Larry thought for a moment, took a deep breath, and responded, “I think the latter, Simon. I mean, be honest. You know me well – certainly well enough to know that when it comes to business I try to take my faith seriously. But am I not seeing stuff that I should be seeing?”

Scott was the next one to speak. “That’s a really fascinating question, mate. I’m not sure though that we’re qualified to talk. You’re the one in the industry – not us. We don’t understand how you operate so it’s difficult for us to comment.”

Trevor interrupted, “I actually think Larry’s question is a fair one to ask. It seems to me that sometimes we’re up so close to something that we don’t see the thing right in front of us.”

There was a palpable silence. But Trevor’s brain was doing some serious work. “Hey, have you guys heard of the Johari Window?”

The blank looks indicated no, so Trevor carried on, “It’s a way of looking at ourselves that helps improve our self-awareness as well as our understanding of others.”

Trevor reached for his bag and eventually pulled out a dog-eared, folded sheet, and proceeded to put it on the table in front of them.

“It basically gets us to recognize four parts to ourselves. See – represented by each of the four quadrants.

“Firstly there’s stuff about each of us that is known to both ourselves and to others. For example, you guys know that I’m quite idealistic and that I think conceptually. I recognize that about myself as well. Everyone who knows me sees those character traits. That’s called our “open” self.

“The second quadrant is the part of ourselves that is known to us, but which other people don’t see. It’s private – stuff we haven’t revealed to others for a whole lot of reasons. So we put up a façade and conceal it from others.

“The third quadrant is often called the “blind spot” quadrant. It’s the stuff about ourselves that others see but which we aren’t aware of. We’re blind to it.

“And then the fourth quadrant is the things about us which are completely unconscious – we don’t see them ourselves, and others don’t either. But nevertheless they still are part of who we are, and they deeply affect how we relate and live. I guess it’s the undiscovered parts of ourselves that only God knows.

“The point about all this, of course, is that growing as a person means developing a fuller self-understanding. In other words, the road to maturity is progressively beginning to see those things about us that are in the three partly hidden or fully hidden quadrants. Bringing them out into the open more and more. Not that everyone has to see “all of us” – but to be really known and loved, and to be able to really know and love ourselves, we need to have at least a few people in our lives who see us for who we really are – both good and bad.”

By this stage Simon was growing a little impatient, “So-o-o … what’s this got to do with Larry’s situation?”

“Well, it occurred to me as we were talking that the same issues of self-awareness that we struggle with as individuals might also apply to many of the industries and professions we’re a part of.

“Just as we’re each dogged with blindspots about ourselves – things others see that we don’t – so an industry like financial planning may have blind spots. Things that are obvious (or at least see-able) to some outside the profession but that those within the industry are unaware of … or maybe even aware of, but things that are just considered acceptable or normal practice.

“In this case, when I’m talking about blind spots I mean practices and ways of operating that are so accepted within an industry that everyone has come to assume they’re okay – even ethical. But when you’re close to an issue you lose the ability to evaluate the moral fairness of what you’re doing.”

Scott butted in, “I think I’m getting your drift, Trev, but can you give us an example?”

“Trevor thought for a moment. “I have a mate who is a car dealer. We were having lunch not so long ago and he told me that many dealers make nearly as much money out of financing people into vehicles as they do from the actual profit on the sale. He said that because of the commissions and kickbacks from the finance companies, it actually pays a dealer to sign people up for car loans, rather than sell them a vehicle that’s more affordable and that they can pay cash on. So it becomes a natural incentive to get people into vehicles they can’t really afford.

“My friend told me that this kind of practice is considered totally acceptable, even among car dealers who pride themselves on running an honest yard.”

“You mean ones like your mate?” Larry asked.

“Yeah. This guy is high on integrity. He has a great reputation and people really appreciate his genuineness. But he told me that it’s only been recently that he began to realize how destructive this practice was. He was mortified when he realized the damage it was causing. Turns out that he’s now completely changed the way he sells cars. As a result, he’s put strict criteria on himself regarding finance deals. In fact he’s even considering taking the radical step of not offering finance at all.”

Larry was intrigued. “What made him recognize the blind spot?”

“Oh, a mixture of things really. And for him it didn’t happen all of a sudden. He’d been doing some Bible study on money and debt. At the same time he had a sobering conversation with one of his customers who had had his car repossessed – turns out they couldn’t afford the repayments – probably a bit like your recent experience, Larry. And then he told me that for the past couple of years he’s been meeting regularly with a bunch of others – sort of like our group – and they’ve now made a point of helping each other. Their aim is to grow in their understanding of following Jesus in the workplace. That really helped, he said, because it gave him support for working things through.

“Since then he’s begun to think about other sides of car dealing that he’d just taken for granted. Lots of them, he reckons.”

“Like what?” asked Simon.

“Oh, he had a whole list of things – like the way the negotiation process tends to erode trust between the salesman and customer, and encourages deception and game-playing. Then he mentioned to me about how he’d even begun to think about the type of vehicles he sold and their impact on the environment and community. Not that he had simple answers to these issues, but what impressed me was he was clearly beginning to see car dealing in a whole new light and asking questions that previously he wouldn’t have considered.”

Scott glanced at his watch and let out a despairing grunt. “Sorry guys, I gotta run. Can we pick up where we left off, next time? I’m fascinated by this but I’ll miss my first appointment if I’m not careful.”

The meeting quickly dissolved as everyone hightailed it to their places of work.

* * *

For the next few months the breakfast group took on a whole new level of conversation. They agreed that it wasn’t just Larry who needed help. Each of the guys recognized that there were likely blind spots in all of their perceptions of what it meant to work ethically – Christianly – in their particular contexts.

In a healthy environment of trust, they began to let each other in on how they went about their work, giving the others freedom to probe and ask questions.

Larry found this liberating. At no stage did he feel “got at”. It wasn’t for the others to make value judgements about his way of operating. Instead he viewed the questions that Fred, Scott, Simon and Trevor raised as open-ended invitations to really grapple with the difficult challenges of seeking to follow Jesus faithfully as a financial planner.

In time, Larry’s perspective widened. He came to re-evaluate standard practices such as receiving commissions from finance companies for signing on investors, and charging a fixed fee regardless of how well or poorly the investment performed. And of course there was lots of talk about what might be considered “ethical investments”, and even around what responsibility, if any, an advisor had to raise with clients “how much was enough” to save for retirement.

Like Larry, the other guys found their own fields of endeavour a complex web of issues and questions. It wasn’t like there were generally easy answers to be found. But, as they discussed and prayed, probed and explored, they began to discover the deep sense of satisfaction that came from working hard at their faith, allowing it to impact and transform their professions. They would never be the same again.