BP #10: Ethics in Investing

An elementary school dance teacher, Ms. Lindert has called attention to complexity of investments, specifically for public school employees. After being referred to the plan by her sister, she signed on to a fixed index annuity. Later, when her agent advised her to transfer to another in order to qualify for a bonus, she did so. Her math teacher colleagues, however, considered her contract “mathematically ambiguous.”

This article reminded me of a couple of topics we’ve covered so far in class.

The first being blind obedience. Although Ms. Lindert has a master’s degree in dance, she has little to no experience in the world of finance, according to the article. One would think that when even considering investing a large lump sum of money into something, he or she ought to educate him or herself to understand even the basic fundamentals of the plan. Just because an investment option has a higher yield rate than others doesn’t always mean it’s the best option. In addition, because it has a much longer time to pay over with more annuity periods, it should be up to the person investing their money to not only look at their options, but understand them and the risk associated with them.

On the other side of the story is the agent with whom she chose to trust. She chose the agent based on a suggestion from her sister who is also a teacher. According to the article, she took the agent’s word over the course of several years. Although the agent clearly has the superior knowledge, Ms. Lindert should still have taken the responsibility to be informed on her decisions and educate herself past what her agent told her, instead of blindly obeying what the agent suggested.

Lastly I want to address that the agent receives commissions for the investments he or she secures. This creates incentives for the agent to get his or her clients to sign higher yielding plans, and in some cases they do this by taking advantage of clients who don’t know any better. By conducting business in this way, the agent is treating his or her clients simply as a means to an end, the end being high profits, which would violate Kant’s Humanity Formulation. Instead of treating clients as the humans they are, trying to invest money for their retirement and other savings, many are being used only to generate higher revenues.

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