It's only natural to question whether doctors breach their fiduciary duty as a result of their conflicts of interest. Arguments have been made that suggest otherwise.

How can this be? In its 1991 report "Patient Outcomes Research Teams (PORTS): Managing Conflict of Interest," The National Academies of Sciences, Engineering, and Medicine explore two models of conflict-of-interest management. They are the "Prohibition Model" and the "Disclosure and Peer Review Model."

In describing the former, the report says the existence of a conflict of interest must be weighed against the "redeeming social value" derived from that conflict. For example, doctors seeing patients can see immediately the impact of certain medications. As experts, wouldn't it serve the best interests of society for them to serve in capacities that would allow them to improve those drugs? And wouldn't it be fair for them to be compensated for such service? Yes, the doctor would therefore have a conflict of interest, but that's merely a proxy for the greater conflict of interest between what's in the best interest of the patient and what's in the best interest of society.

Whoa. That's sounds like a paradox straight out of Philosophy 101. We don't need to go there because, if no "redeeming social value" exists, then we can invoke the prohibition model. When it comes to the financial services industry, it's tough to argue that society's best interests supersede individual client best interests.

Let's look at an example. Medical researchers constantly deal with life and death matters. They experiment with drugs to improve the health and lives of people. Along the way, however, individual patients may be harmed or even die as a result of these experiments. Is it in the best interest of the patient to die as a result of taking the drug? Obviously not. On the other hand, is it in the best interest of society if, as a result of that patient dying, the drug is improved; thus, saving thousands if not millions of lives?

That's the Philosophy 101 question I promised we'd avoid. We can avoid it for this simple reason: No financial service represents a life or death matter. We don't need to experiment with one individual's finances in a way that leads to the death of that individual just so we can discover a process that will allow others to live longer. Instead, each individual's needs are just that – individual. Those specific financial facts and circumstances, unlike the chemistry of medicine, are not transferable to another person.

No financial service provider needs to regularly engage in self-dealing transactions to serve the best interests of a client. This doesn't mean there aren't exceptions to this rule. What it does mean, though, is that there's no possible justification to pursue a business model predicated on self-dealing transactions. If no alternative business models existed, that would be one thing. But they do.

The truth is, every day thousands of financial service professionals serve the best interests of tens of thousands of clients without relying on self-dealing transactions. These clients range from small to large, from young to old, from coast to coast.

No regulator, no politician, no industry association has yet to prove, beyond the shadow of a doubt, that business models built on self-dealing transactions offer a greater "redeeming social value." Therefore, there is no reason not to ban self-dealing transactions.

BenefitsPRO related reading:

Sales and advice: The oil and water of finance — Carosa

A rose is a rose… and a broker is a broker — Carosa

Great fiduciaries must meet the empathy challenge — Carosa