Ethical Imperatives for Rational Paternalism in Advisor-Client Relationships

Dissertation Proposal

Abstract

This study seeks to understand the role of ethics and rational paternalism in the practice of financial advising. A significant amount of research examines the effects of rational paternalism on the governmental and institutional levels. Very little research has addressed the issues associated with rational paternalistic behavior by advisors toward their clients. Fortinelle (2016) focuses on advisors' ethics and moral responsibilities, underscoring the ethical standards clients should expect from their financial advisors. However, practically none of the literature examines individual paternalism's ethics, morals, and practical aspects. In response, this study explores the concept of rational paternalism in advisor-client relationships, its underlying principles, and its application in financial services. It discusses the potential benefits and ethical considerations of adopting an advisor-client rational paternalistic approach in financial decision-making. The aim is to shed light on its implications for consumers and financial service providers and raise the general level of professionalism in the financial services industry. Most importantly, and specific to the advisor-client relationship, the significance of this study is the potential for rational paternalism to provide financial advisors with the same level of professionalism enjoyed by other professions, such as law and healthcare. Today, rational paternalism is practiced in a wide range of disciplines, most especially healthcare and social work, where clients best interests are paramount. Drawing on this experience, the overarching purpose of this study is to develop an informed and timely answer to the guiding research question, Can the practice of rational paternalism in advisor-client relationships positively affect the financial outcomes for the clients and advisors?

CHAPTER 1: INTRODUCTION

In financial services, clients often rely on financial advisors to make the best wealth-planning decisions. Financial advisors are tasked with the fiduciary duty to act in their client's best interests. Herein lies the essence of rational paternalism, an intriguing concept at the intersection of economics, ethics, and behavioral science (Thaler & Sunstein, 2020). Rational paternalism advocates for interference in an individual's decisions if it is assumed that the intervention would make the person better off, as per their standards or measures. This dissertation aims to examine the concept of rational paternalism and explore its role, implications, and applications in advisor-client relationships in financial services from the standpoint of the ethical imperatives regarding its application.

Any reference to ethical imperatives necessarily presupposes the question of what ethics is. Ethical systems aboundfrom classical virtue ethics to deontology to utilitarianism and even ethical egoism (i.e., ethical self-interest or subjectivism in the extreme) (Rachels, 2003, Ch 5) so often found in practice today (Sheedy et al., 2021; Sullivan et al., 2021). Each system has its own ethical imperatives, so it is of utmost importance that at the outset of any discussion of imperatives, one defines the system by which one will be applying the rule. Ordinarily, any discussion of ethical imperatives in advisor-client relationships would stem from the system of duty ethics, as it correlates with the fiduciary duty the advisor owes to the client (Dembinski & Monnet, 2009).

One of the challenges, however, is that rational paternalism represents a system of ethics that stems from deontology and utilitarianism, with a mixture of subjectivism thrown in for good measure (since the advisor himself makes decisions). To top it off, it requires a bit of virtue ethics to help keep the whole approach on the proverbial straight and narrow path of rightness (Koehn, 2020). Yet,the discussion of rational paternalism in the contexts of Deontology, Utilitarianism, American Pragmatism, and Virtue Ethics seems superfluous for the purposes of this paper.

More salient is to provide the theoretical foundation for theethics of paternalism in financial services…

Ethical Imperatives for Rational Paternalism in Advisor-Client Relationships

Dissertation Proposal

Abstract

This study seeks to understand the role of ethics and rational paternalism in the practice of financial advising. A significant amount of research examines the effects of rational paternalism on the governmental and institutional levels. Very little research has addressed the issues associated with rational paternalistic behavior by advisors toward their clients. Fortinelle (2016) focuses on advisors' ethics and moral responsibilities, underscoring the ethical standards clients should expect from their financial advisors. However, practically none of the literature examines individual paternalism's ethics, morals, and practical aspects. In response, this study explores the concept of rational paternalism in advisor-client relationships, its underlying principles, and its application in financial services. It discusses the potential benefits and ethical considerations of adopting an advisor-client rational paternalistic approach in financial decision-making. The aim is to shed light on its implications for consumers and financial service providers and raise the general levl of professionalism in the financial services industry. Most importantly, and specific to the advisor-client relationship, the significance of this study is the potential for rational paternalism to provide financial advisors with the same level of professionalism enjoyed by other professions, such as law and healthcare. Today, rational paternalism is practiced in a wide range of disciplines, most especially healthcare and social work, where clients best interests are paramount. Drawing on this experience, the overarching purpose of this study is to develop an informed and timely answer to the guiding research question, Can the practice of rational paternalism in advisor-client relationships positively affect the financial outcomes for the clients and advisors?

CHAPTER 1: INTRODUCTION

In financial services, clients often rely on financial advisors to make the best wealth-planning decisions. Financial advisors are tasked with the fiduciary duty to act in their client's best interests. Herein lies the essence of rational…

Ethical Imperatives for Rational Paternalism in Advisor-Client Relationships

Dissertation Proposal

Abstract

This study seeks to understand the role of ethics and rational paternalism in the practice of financial advising. A significant amount of research examines the effects of rational paternalism on the governmental and institutional levels. Very little research has addressed the issues associated with rational paternalistic behavior by advisors toward their clients. Fortinelle (2016) focuses on advisors' ethics and moral responsibilities, underscoring the ethical standards clients should expect from their financial advisors. However, practically none of the literature examines individual paternalism's ethics, morals, and practical aspects. In response, this study explores the concept of rational paternalism in advisor-client relationships, its underlying principles, and its application in financial services. It discusses the potential benefits and ethical considerations of adopting an advisor-client rational paternalistic approach in financial decision-making. The aim is to shed light on its implications for consumers and financial service providers and raise the general level of professionalism in the financial services industry. Most importantly, and specific to the advisor-client relationship, the significance of this study is the potential for rational paternalism to provide financial advisors with the same level of professionalism enjoyed by other professions, such as law and healthcare. Today, rational paternalism is practiced in a wide range of disciplines, most especially healthcare and social work, where clients best interests are paramount. Drawing on this experience, the overarching purpose of this study is to develop an informed and timely answer to the guiding research question, Can the practice of rational paternalism in advisor-client relationships positively affect the financial outcomes for the clients and advisors?

CHAPTER 1: INTRODUCTION

In financial services, clients often rely on financial advisors to make the best wealth-planning decisions. Financial advisors are tasked with the fiduciary duty to act in their client's best interests. Herein lies the essence of rational paternalism, an intriguing concept at the intersection of economics, ethics, and behavioral science (Thaler & Sunstein, 2020). Rational paternalism advocates for interference in an individual's decisions if it is assumed that the intervention would make the person better off, as per their standards or measures. This dissertation aims to examine the concept of rational paternalism and explore its role, implications, and applications in advisor-client relationships in financial services from the standpoint of the ethical imperatives regarding its application.

Any reference to ethical imperatives necessarily presupposes the question of what ethics is. Ethical systems aboundfrom classical virtue ethics to deontology to utilitarianism and even ethical egoism (i.e., ethical self-interest or subjectivism in the extreme) (Rachels, 2003, Ch 5) so often found in practice today (Sheedy et al., 2021; Sullivan et al., 2021). Each system has its own ethical imperatives, so it is of utmost importance that at the outset of any discussion of imperatives, one defines the system by which one will be applying the rule. Ordinarily, any discussion of ethical imperatives in advisor-client relationships would stem from the system of duty ethics, as it correlates with the fiduciary duty the advisor owes to the client (Dembinski & Monnet, 2009).

One of the challenges, however, is that rational paternalism represents a system of ethics that stems from deontology and utilitarianism, with a mixture of subjectivism thrown in for good measure (since the advisor himself makes decisions). To top it off, it requires a bit of virtue ethics to help keep the whole approach on the proverbial straight and narrow path of rightness (Koehn, 2020). Yet,the discussion of rational paternalism in the contexts of Deontology, Utilitarianism, American Pragmatism, and Virtue Ethics seems superfluous for the purposes of this paper.

More salient is to provide the theoretical foundation for theethics of paternalism in financial services in general and for rational paternalism in particular. As a framework, rational paternalism attempts to balance the interventionist role of institutions and individuals in guiding decisions while preserving autonomy and respect for individual agency. As outlined by key scholars, ethical commitments are crucial for understanding its application in financial services and insurance.

Thaler and Sunstein (2008) introduce the concept of "nudging," where subtle interventions help guide individuals toward better choices without restricting freedom. Their approach maintains a fundamental ethical commitment to individual autonomy while promoting welfare by manipulating customers behavior. This concept is particularly evident in their work on decision-making in areas of finance, where cognitive biases may hinder optimal choices. The ethical challenge here lies in balancing autonomy with the responsibility of institutions to protect individuals from their irrational tendencies, a key tenet of rational paternalism. Thaler and Sunstein argue that nudges should respect individuals freedom to choose while steering them toward more rational outcomes, especially when decision fatigue or complexity impedes their ability to act in their best interests.

Gerald Dworkin (2015) provides a foundational understanding of paternalism, particularly regarding autonomy and the ethics of intervention. Dworkins work is essential in defining the boundaries between permissible and impermissible paternalistic actions. His framework suggests that paternalism can be ethically justifiable when it respects the individual's rational capacities and is aimed at preventing harm or promoting long-term benefits. In rational paternalism, this ethical commitment involves a nuanced understanding of when it is appropriate to intervene in decision-making processes without undermining the individual's dignity or autonomy. Dworkin emphasizes that paternalistic actions must be justified by the likelihood of preventing significant harm or achieving meaningful benefits that individuals, due to cognitive biases or limited information, might not recognize themselves.

Tsai (2014 introduces the notion of rational persuasion as a form of paternalism, where ethical concerns are addressed through dialogue and the provision of reasons rather than coercive measures. In her view, rational paternalism is ethically justified if the persuasion respects the individual's capacity for reason and aims at enhancing their decision-making processes rather than manipulating them. Tsais framework is particularly relevant in contexts where individuals need to be persuaded to adopt behaviors that align with their long-term interests, financial planning, or health-related decisions. The ethical commitment here is to ensure that the persuasion remains rational, transparent, and devoid of coercion, maintaining respect for the individuals autonomy while guiding them toward better outcomes.

The ethical commitments in rational paternalism center around respecting individual autonomy while recognizing the need for interventions that enhance decision-making. The works of Thaler, Sunstein, Dworkin, and Tsai provide a theoretical foundation for understanding how paternalistic actions can be ethically justified when aimed at promoting welfare, preventing harm, and supporting rational decision-making without coercion. These commitments are crucial in contexts like financial services, where individuals often face complex and high-stakes decisions that may benefit from paternalistic guidance. By integrating these ethical frameworks, rational paternalism can strike a balance between respecting individual freedom and promoting outcomes that serve the individual's best interests.

Rational paternalism is also a concept commonly practiced in various professions where an expert is expected to guide a less-informed individual's decisions, including medicine, accounting, legal, and financial services. Rational paternalism operates in each of these fields in different ways. In healthcare, doctors often find themselves in a paternalistic role, making decisions that they believe are in the best interest of their patients (Fleisje, 2023). For example, a doctor might recommend a particular treatment plan based on their professional judgment, which the patient might not fully understand. This paternalistic approach is becoming more nuanced with the advent of shared decision-making and informed consent, emphasizing patient autonomy. Yet, elements of rational paternalism remain, particularly when patients are incapacitated or when complex medical decisions are involved (Savulescu 1995). Implicit in this approach is the patient's trust in the healthcare professional.

In accounting, accountants may apply rational paternalism when advising clients on complex tax issues or financial record-keeping. They use their expertise to guide clients toward decisions in their best financial interest (Adafula 2018). This could include advising clients to adopt certain financial practices or make specific tax decisions they may not have considered or understood on their own. Again, trust is implied.

Lawyers are especially prone to exercising rational paternalism when representing their clients. They use their legal expertise to make decisions or recommendations that are in the client's best interest, even if clients don't fully grasp the legal complexities. This could include advising on the best course of action in a legal case or recommending a specific legal strategy. Once more, the client-lawyer relationship is based on trust.

Financial advisors exercise rational....... from nudging clients to save more for retirement, diversifying investments, or choosing suitable insurance products. They balance the asymmetry of information by providing expert advice to help clients navigate complex financial markets. Yet, here, trust is not necessarily a given. One may more easily trust ones health or freedom (as these are somewhat abstract in principle) to a professional than one may trust ones wealth, which is near, tangible, and easily discernible. Trust in financial services is not always a given. This, then, makes the concept of rational paternalism all the more challenging in advisor-client relationships.

Thus, despite similarities, the approach and degree to which rational paternalism is applied can vary significantly between these professions. This is likely due to the trust factor, as noted, as well as differing ethical guidelines, professional standards, and the nature of the decisions being made. For instance, while a doctor might have more leeway in making decisions for a patient under certain circumstances (like emergencies), a financial advisor's role is more about guiding and advising rather than making decisions on behalf of the client. Moreover, the consequences of paternalistic decisions also differ, ranging from health outcomes in medicine to financial well-being in accounting and financial services.

Problem Statement

The problem of interest concerns the financial services profession, particularly the life insurance industry, which is still wallowing in self-doubt, haunted by its history of unscrupulous sales tactics for most of the last century and reeling from product-based planning. Complicating matters is the fact that there remains a lack of relevant ethical guidelines for the financial advisor industry, which makes determining what is genuinely in clients' best interests especially challenging. Against this backdrop, identifying opportunities to improve advisor-client relationships has assumed new importance and relevance today. However, many ethical questions are involved,especially regarding how both stakeholders view the advisor-client relationship. In their capacity as fiduciaries, financial advisors have a fundamental obligation to conform to relevant codes of ethics and standards of professional conduct while always keeping the client's best interests as the main priority.

Problems can arise when clients seek to buy insurance and mke investments that may not be in their best interests or when financial advisors use their positions to persuade clients to buy insurance and make investments that are likewise not in clients best interests. Consumers can be irrational and consistently make bad financial decisions due to their innate ignorance, heuristics, and biases. The current relationships between the financial industry and consumers lack assertiveness and effectiveness. As a result, the financial advisory industry has failed to gain professional status on par with other professionals, such as physicians and attorneys (Glaeser, 2006).

The results of a survey of 100 financial advisors by Waymire (2013) identified a number of practices that are commonly used in the financial advisor industry that have adversely affected its reputation and corresponding relationships between clients and advisors, including most especially the following:

Financial advisors and sales representatives use salesmanship to obtain new clients and investor's assets;

Financial advisors believe they could avoid the unambiguousness of their disclosures.

Financial advisors often disclose the information they provide to their clients selectively. (Waymire, 2013, para. 2-4).

There are also some dilemmas involved in interpreting the guidance that is available to financial advisors and their relationships with clients. On the one hand, the financial advisor industry prioritizes values such as tolerance, beneficence, professionalism, nonmaleficence, justice, and nonpaternalism (Genuis & Lipp, 2013). On the other hand, though, Genuis and Lipp emphasize that "A major criticism of some of these tenets, however, is that they can be vague, potentially duplicitous, and open to mutually exclusive interpretations" (2013, p. 37). Therefore, it is essential to identify relevant ethical issues involved in interpreting and applying these tenets in real-world practice settings. In this regard, Genuis and Lipp (2013) add that "The three determinants of ethical decision-making involve a convergence of advisor judgment, relevant codes of ethics and client objectives" (p. 37).

These are important issues because of the current troubled state of the financial advisory industry, as noted above. Indeed, Jones and Lesseig (2005) report that there have been a number of charges leveled against numerous financial advisors in recent years, alleging that their guidance to clients has been affected by a range of other factors besides their clients' best interests. For instance, Jones and Lesseig (2005) emphasize that "Advisors may not be sufficiently informed regarding the relationship between share classes, investment size, and investment horizon. We also find that advisor compensation appears to influence the frequency of sales of various share classes" (p. 2). Although overcoming the former constraint is clearly within the scope of financial advisors, addressing the inherent bias that can creep into financial advice based on factors other than clients' best interests is far more complicated.

Beyond the foregoing issues, there are also different standards that financial advisors must follow depending on the type of financial products they handle and which regulatory agency is responsible for these instruments. The Financial Industry Regulatory Authority's "suitability standard" and the Security and Exchange Commissions fiduciary standard require significantly different practices on the part of financial advisors concerning their client's best interests. It is clear that overcoming these constraints and improving advisor-client relationships represent important goals today that are needed to address the poor reputation suffered by the financial advisor industry, and these are the goals directly related to the purpose of the proposed study, as discussed further below.

Purpose

This study seeks to understand the role of ethics and rational paternalism in the practice of financial advising. The purpose of this qualitative study is to develop a cogent understanding of the role rational paternalism plays in financial advising between advisors and their clients. In this context, and by way of comparison with one of the historic societal and governmental withdrawals from prior paternalistic stance, rather than advocating massive abridgment of peoples individual rights to do what they please with respect to their finances, the research draws parallels with O'Connor v. Donaldson, 422 U.S. 563 (1975). Here, the Supreme Court found: "...no constitutional basis for confining such persons involuntarily if they are dangerous to no one." Among many unintended consequences of doing away with non-voluntary commitment were a substantial increase in homelessness and a substantial amount of data showing that despite building more outpatient mental health clinics, unsupervised mental health patients failed to utilize the voluntary support system. In other words, it is legal, although ethically questionable, for financial advisors to allow their clients to invest their money in any way they see fit, even if it is clearly against their best interests. A bequest of an entire multi-million-dollar estate to Fluffy the cat, a religious cult or a known hate group, for instance, may appear spurious and irrational to financial advisors, but their professional guidance must take into account this fundamental individual right.

There is a strong presumption against the abridgment of individual rights in liberal democracies. Under the Utilitarian harm principle, it is justifiable to restrict individual liberties to prevent harm to self and others, as in the medical example when a post-surgery patient rips out the telemetry lids and intravenous lines because they make her uncomfortable. This patient would be undoubtedly restrained and sedated regardless of whether she is cognizant or not of her actions. Another example is a 55-year-old woman with no other substantial assets who receives $1,450,000 cash as part of the divorce settlement and, within two years, gambles it away at several Indian casinos. Should we, as society as a whole and as financial and legal professionals, in particular, have a moral obligation to enjoin her from doing such self-harm? After all, this 55-year-old woman would likely rationalize that she had thousands of opportunities to win major jackpots (possibly even millions of dollrs more) during her 2-year gambling binge. Although the potential for such winnings is slight, it is always there. Then, defining best interests is a highly subjective enterprise, and counseling is intended to provide definitional clarity.

Generally speaking, there are two traditional approaches in such a situation: educating and pointing out to her "the errors of her ways" so she could adjust her behavior or adjusting advice to fit the client's irrationality. These strategies present ethical problems with the latter and practical problems with the former. The impracticality of the former is that she obviously knows the harm she caused to herself. Educating her would be useless, for almost everybody who smokes knows there is harm from smoking. Adjusting advice to cajole her into more beneficial behavior is simply a euphemism for being professionally disingenuous, if not illegal, under the current regulatory environment (Saint-Paul, 2011).

Should advisors assert a more paternalistic role with their clients? The answer to this question should be a conditional "yes." There are two conditions involved in answering this question. First, the current philosophical model of paternalism needs to evolve to include biological factors of human economic behavior. Second, the financial industry must become more counseling than educational and advisory. Just like mental health care professionals and attorneys counsel their patients/clients, financial professionals must evolve to a similar status in their perception of themselves as professionals.

Significance

The significance of this study is the potential to provide financial advisors with the ability to incorporate rational paternalism into their practices akin to law and healthcare. Despite an increasing trend away from paternalism in recent decades, rational paternalism (as differentiated from other types of paternalism such as "soft" versus "hard," "moral v. welfare," "broad v. narrow," "weak v. strong," "pure v. impure") can help financial advisors provide the best possible guidance that is based squarely on clients' best interests. One of the significant constraints to the advisor-client relationship is the asymmetrical nature of the relationship, with qualified and credentialed financial advisors possessing the experience, expertise, and education to counsel clients concerning optimal investments and clients possessing what they may perceive as a "can't-lose" intuition or hunch.

Furthermore, rational paternalism in advisor-client relationships dwells on additional ethical and professional questions and dilemmas that will hopefully fuel further research and debate in the financial services industry for professional ethical guidelines, financial advisors and clients as described below:

1.1. What are the professional guidelines governing ethical behavior for financial advisors?

1.2. How do financial advisors understand their ethical responsibilities?

1.3. How do financial advisors interpretations of their ethical responsibilities relate to decisions in practice when working with clients?

1.4. How do clients perceive the ethical responsibilities of their financial advisors?

1.5. What are clients experiences of ethical decision making while working with a financial advisor?

Social sciences have demonstrated that individuals are very susceptible to social influence and make mistakes based on such influences (Glaeser, 2006). Governmental paternalism is successful: A 50 percent reduction in cigarette smoking since the 1965 warning is credited to a successful paternalistic intervention. Paternalism is widely used in regulating people's behavior in many other demerit products and behaviors: alcohol, drugs, prostitution, charitable contributions, home mortgage deductions, religion-related activity, racism, and even patriotism (Glaeser, 2006).

Notwithstanding these mixed applications and outcomes of paternalism, a growing body of evidence confirms that many consumers have poor money-management skills directly attributable to psychological mechanisms (Sunstein, 2006). Physicians are confronted with patients suffering from physical or mental disorders, and lawyers are faced with clients who engage in illegal activities. In the same context, financial advisors routinely encounter clients who engage in excessive borrowing and insufficient savings contrary to their best interests, which may result from identifiable psychological mechanisms (Sunstein, 2006) that are analogous to those exhibited by the hypothetical millionaire with a gambling problem described above. In the case of excessive borrowing, these psychological mechanisms include, but are not limited to, procrastination, optimism bias, myopia, "miswanting," and what Sunstein (2006) terms "cumulative cost neglect" (p. 251).

When the government is tasked with the problem of excessive consumer borrowing, some paternalistic response is required that influences the antecedent psychological mechanisms that are involved. Such responses can span the entire continuum from soft to strong paternalism depending on the severity of the problem and what changes are sought. In this regard, Sunstein notes, "Suppose that excessive borrowing is a significant problem for some or many; if so, how might the law respond? The first option involves weak paternalism, through debiasing and other strategies that leave people free to choose as they wish. Another option is strong paternalsm, which forecloses choice" (Sunstein 2006, p. 252). Within this context, some type of paternalism is clearly a viable governmental strategy. Similarly, armed with a rational paternalism approach, financial advisors can help clients identify salient psychological mechanisms that may be adversely affecting their decision-making process with respect to their best interests.

Etymology of Paternalism

Etymologically, paternalism comes from the Latin word pater or father. Just like parents have the right to overrule their children's decisions and actions, society often intervenes in an individual's financial decision-making. Paternalism interferes with individual choice; it is ostensibly benevolent, for it aims at the subject's welfare, and it is applied without the consent of the subject (New 1999).

Virtually all literature on all forms of paternalism in the financial marketplace is fundamentally utilitarian by extrapolating on John Stuart Mill's "harm principle." Mill justified the use of coercion against an individual, causing harm to others without their consent. Under act utilitarianism, the harm principle limits "harm" to "others." Rule utilitarian expands "others" to include the actor herself under "most good for most." Although many commentators claim Mill's stance to be generally anti-paternalistic by stating that he thought that individual rights were supreme good for all, what is often omitted is that he reserved those rights to rational adults only without regard to children and adults who are mentally and emotionally deficient. In this regard, Laslett, P., & Fishkin, J. S. (Eds.). (1992) points out that:

When Mill states that 'there is a part of the life of every person who has come to years of discretion, within which the individuality of that person ought to reign uncontrolled either by any other person or the public collectively,' he is saying something about what it means to be a person, an autonomous agent. It is because coercing a person for his own good denies this status as an independent entity that Mill objects to it so strongly and in such absolute terms.

Even under optimal circumstances, individuals cannot act wisely without knowledge, which is the motivation behind seeking financial advice. This motivation provides the rationale in support of rational paternalism. As Bandman (2003) points out, "The highest knowledge of all is the knowledge of the good, which requires the love of wisdom rather than its imitators or pretenders. Such a philosophical orientation is rational paternalism, for it gives authority to those who know and those who seek to know" (p. 36). Rational paternalism has gained increasing acceptance in the medical profession in recent years. Although disdaining the traditional paternalistic approach to the provision of healthcare advice, Savulescu (1995) emphasizes that:

We can retain the old-style paternalist's commitment to making judgments of what is, all things considered, best for the patient (and improve it) but reject his commitment to compelling the patient to adopt that course. This practice can be called rational, non-interventional paternalism. It is 'rational' because it involves the use of rational argument. It is 'non-interventional' because it forswears doing what is best. (p. 331)

Moreover, judiciously applied, rational paternalism can even help financial advisors confront ethical dilemmas concerning clients' best interests. For instance, Bandman (2003) adds that "One can debate the merits and drawbacks of rational paternalism, which finds almost no virtue in individual freedom or democracy, but it does provide a reasoned answer against self-interest morality as the exclusive basis for deciding what is right or wrong" (p. 36).

Applied to the financial advisor industry, the conventional approach to the provision of guidance assumes clients possess full rationality (Whitman & Rizzo, 2015). Although there remains some controversy concerning what full rationality means, there is a general consensus among practitioners regarding the following elements:

1. Consumer's stated goals and actions are congruent.

2. Those goals accurately reflect the true costs and benefits of the available options.

3. Consumers update their goals and beliefs as circumstances change.

(Whitman & Rizzo, 2015, p. 37).

When all three of these components reflect full rationality, the application of rational paternalism will likely be far more effective based on the "full authority" it assigns to the client and financial advisor. When one or more of these components of full rationality are diminished, the need for rational paternalism expands. There have also been some recent trends in the economic sphere where rational paternalism is gaining increasing acceptance. In this regard, Adams and Burke note that "Where traditional paternalism seeks to override the individual's preferences, the new paternalists accept the economists' premise that consumers' preferences are beyond reproach. Instead, they focus on behavioral evidence suggesting that people cope with cognitive limitations by developing rules of thumb or heuristics which, while useful