I have a cartoon somewhere where the boss is talking to an employee. The caption, “Honesty may be the best policy, but it is not company policy.”
It seems to many that honesty is not the policy of some businesses and it is not often government policy. Perhaps these conditions arise from their interface with not always honest customers. Despite the pervasiveness of moderate levels of dishonesty, the Supreme Court of Canada (SCC) has now ruled that honesty is a requirement in all contracts.
The case on this matter is Bhasin v. Hrynew and the SCC has added honesty to the more common standard of good faith. There is a fine summary of the case here by Cameron Mitchell and Nigel Smith of Sorbara Law.
This case will have far reaching and as yet unknown effects in business dealings. Eventually the outcomes will rely on what honesty means. Will it be merely the “tell no lies” model or will it include a standard like that of a witness. “The truth, the whole truth and nothing but the truth.”
If is the latter standard, every advisor and likely everyone who enters into any kind of a business arrangement will be facing problems. Truth is a slippery subject. My truth and your truth could well be different.
Advisors and other professionals must work to better educate clients. How can you tell “the whole truth” when the client’s training and experience precludes them from understanding that. Most sales trainers have told people that you should not tell people things they cannot comprehend. It increases confusion rather than amplifying understanding.
On something common like a life insurance policy, there are almost no clients, a few people outside the actuarial department at head office and only some advisors who understand it in deep terms. The “whole truth” model. You cannot communicate what you do not know. It gets worse, if anything, with investments.
As I have said before, “If your business model relies on poorly informed clients, you will be in trouble eventually.” Educate the clients who want to participate. Avoid incompetent clients. The Bhasin case just adds impetus.
Don Shaughnessy is a retired partner in an international public accounting firm and is presently with The Protectors Group, a large personal insurance, employee benefits and investment agency in Peterborough Ontario. Contact: firstname.lastname@example.org