What is a "conflict of interest"?
A “conflict of interest” occurs when an individual, group, or organization has multiple interests during pursuit of enterprise and a conflict arises when one of those interests could possibly corrupt the motivation for an act in another.
Trusting Relationships
When relationships between parties create a situation where the first party places their trust and confidence in a second party, then the first party is at risk of being exploited for the benefit of the second. In these situations the second party usually has competing professional or personal interests making it hard to fulfill the expectations of the first in an impartial manner.
A similar situation exists when a party has two duties that conflict. For example, a professional may have a duty to recommend a product that is best suited for a client but also has a duty to only recommend a specific product because of a binding vendor relationship.
Improper or Not
While a “conflict of interest” creates an appearance of impropriety, it does not always result in the same. For example, a “conflict of interest” can be disclosed or discovered and then defused prior to any acts of impropriety being committed. This generally identifies the conflict, and may potentially defuse it, but does not always mitigate it fully and in fact; many times conflicts are casually disclosed with little effect on the subsequent impropriety.
Protection
Understanding potential or existing conflicts is your best protection. Certain “conflicts of interest” are unusually hard to overcome. For example, a trusted party may have 2 products one from which he receives significantly more compensation. Will he give up the additional compensation to recommend the better suited lower compensated product? Will he forgo all compensation if there’s another competing product that he knows to be superior to his?
You need to work equally hard at identifying “conflicts of interest”. Do not depend on the professional to disclose a conflict or trust that his credentials protect you or ensure he is trustworthy. Transparency, defined as openness, communication, and accountability can be an indicator of a group or individual’s integrity. Greater levels of transparency also help you determine conflicts, and if a professional is not forthcoming with requested information then proceed with caution.
At the End of the Day
It is up to the consumer to evaluate the company, the individual, and their methods of doing business, so give some special attention to looking at the big picture. While an individual may be genuine, he’s still bound to his employer’s methods and no matter what; he’s got a moral obligation to his family to remain employed. All of these have an influence on the type of product, service, or advice you may receive. So at the end of the day it is still up to you to do your own “due diligence” and do it well!
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