The Compass and the Calculator: Deontology, Utilitarianism, and the Ethics of Financial Advice

Author: Clayton Daniel, CEO of Ensombl and former practice principal of Hillross Silverstone

The financial planning profession in Australia is not merely a technical discipline—it is a moral practice. Advisers are entrusted with shaping the financial futures of individuals and families, and that trust rests on ethical foundations. In recent years, with the codification of ethical obligations under FASEA’s Code of Ethics, the industry has taken steps to formalise these expectations. Yet, to truly elevate professionalism, advisers must also understand the philosophical scaffolding underpinning these obligations.

Two major ethical frameworks—deontology and utilitarianism—offer profoundly different ways to think about what is right. This article will explore how these philosophies manifest in financial advice practice, not to choose one over the other, but to enrich our ethical decision-making toolkit.

Deontology: The Rule of Right Action

Deontology, from the Greek deon (duty), holds that actions are morally right or wrong independent of their consequences. Developed most famously by Immanuel Kant, deontology teaches that we must act in ways that are consistent with moral rules or duties, even if doing so leads to suboptimal outcomes.

At its core, deontology focuses on intention and principle.

Deontology in Financial Advice

Financial advisers operate in a regulatory ecosystem that in many ways reflects a deontological structure: a set of rules, standards, and obligations define what advisers must do. FASEA’s Code of Ethics, with its emphasis on honesty, fairness, and acting in the client’s best interests, aligns with a deontological perspective.

For example:

• Standard 1 requires that advisers act with integrity and in the best interests of each client. Even if breaching this duty might help a client achieve a better return, it would be ethically impermissible under deontology.
• Standard 3 prohibits advisers from acting where a conflict of interest cannot be effectively managed. Here, the principle is clear: integrity cannot be sacrificed for convenience or gain.

Deontological ethics supports the idea that there are lines we cannot cross, even for a good cause. An adviser may be tempted to withhold a confronting truth from a client to preserve the relationship, but deontology would argue that honesty is non-negotiable—truth-telling is a duty, not a strategy.

Strengths of Deontology

• Clarity and Predictability: Advisers know what is right by referring to rules and duties.
• Professional Trust: Clients trust advisers to be guided by principle, not expediency.
• Legal Alignment: The compliance framework of the Corporations Act and ASIC regulations resonates with deontological ethics.

Limitations in Practice

However, deontology can falter in complex, real-world scenarios. Imagine a client facing serious financial distress who is not eligible for early access to super under current legislation. A purely rule-bound approach may seem morally inadequate in light of the client’s suffering. In such moments, advisers might look beyond the duty to ask: “What outcome will cause the least harm?”

Enter utilitarianism.

Utilitarianism: The Morality of Outcomes

Utilitarianism is consequentialist—it evaluates actions by their outcomes. Founded by Jeremy Bentham and expanded by John Stuart Mill, utilitarianism holds that the right action is the one that maximises happiness or wellbeing for the greatest number.

The focus here is on results.

Utilitarianism in Financial Advice

In a utilitarian framework, ethical decisions are assessed by the benefit they create. An adviser working within this philosophy weighs different options based on their client outcomes, not just compliance with duty.

For example:

• Suppose an adviser is developing a retirement strategy for a couple who are emotionally attached to their investment property but are cash-poor. A utilitarian might recommend downsizing or selling, calculating the emotional loss is outweighed by the long-term security, reduced stress, and increased quality of life.
• In another instance, an adviser may recommend a slightly more expensive product because it includes superior customer support and has a better track record of outcomes. While this may technically deviate from a narrow cost-based “best interest” view, it could be seen as ethical through a utilitarian lens.

Utilitarianism aligns closely with client-centricity—maximising their long-term wellbeing, even if the immediate recommendation is uncomfortable or unpopular.

Strengths of Utilitarianism

• Holistic View: Focuses on long-term client outcomes and wellbeing.
• Flexibility: Allows context-sensitive decisions when rules feel too rigid.
• Empathy-Based: Considers the emotional, social, and relational dimensions of financial advice.

Limitations in Practice

The chief risk of utilitarianism is justifying questionable conduct for a “greater good”. For instance, using misleading projections to keep a client invested in a downturn may reduce panic selling and preserve their wealth—but it violates their autonomy and the principle of honesty.

Moreover, predicting outcomes is inherently speculative. Advisers operate in uncertain environments—what seems like the greatest good today may unravel tomorrow. Utilitarianism, when applied too loosely, can also open the door to rationalising poor behaviour as pragmatism.

The Ethical Tension in Practice

In the day-to-day world of financial planning, these two ethical theories are not academic abstractions—they are the foundation of every client conversation, every compliance decision, and every strategic recommendation.

Consider this dilemma:

A long-standing client asks you to reclassify them as a wholesale investor to participate in a high-risk, high-return private equity fund. They don't technically qualify under the Corporations Act definitions but have some experience and a strong desire to invest.

• A deontologist might refuse outright: rules are rules, and bending them breaches professional standards.
• A utilitarian might consider the client’s capacity, experience, and the potential benefits, and seek a creative workaround, such as engaging an accountant for a sophisticated investor certificate.

Both perspectives contain valid ethical logic. The professional challenge is learning to balance principle with pragmatism.

Philosophical Integration: Toward Ethical Maturity

While deontology and utilitarianism offer contrasting lenses, the most ethical advisers learn to integrate both.

• Start with duty: Let professional standards, the Code of Ethics, and client rights form the foundation.
• Evaluate the impact: Weigh the likely outcomes of your recommendations and actions on client wellbeing.
• Respect the individual: A Kantian approach emphasises treating clients as ends in themselves—not means to an outcome.
• Use empathy and reason: Combine the heart of utilitarianism with the backbone of deontology.

The ethics of financial advice is not about choosing between rules and results—it’s about building a professional identity grounded in principle, attuned to outcomes, and shaped by reflection.

The Adviser as Moral Agent

Financial advisers in Australia are not simply intermediaries between products and clients—they are moral agents. Each conversation is a moment of ethical significance. Each recommendation carries the weight of trust. Each decision reflects not just what you know, but who you are.

Advisers who engage deeply with philosophical frameworks like deontology and utilitarianism cultivate what Aristotle called phronesis—practical wisdom. It is the art of knowing not just what is right, but when, how, and why to do it.

Conclusion

The financial planning profession is undergoing a cultural evolution. Technical knowledge is no longer enough. What’s required is moral literacy—the ability to navigate complex, high-stakes decisions with clarity and care.

Deontology teaches us to act from principle. Utilitarianism reminds us to act for people.

Together, they provide the twin ethical compasses for the modern financial adviser: one pointing to duty, the other to outcome. Between them lies the path to truly professional advice.

Learning Outcomes:

Upon reading this article, financial advisers will be able to:

1. Distinguish between deontological and utilitarian ethical theories.
2. Apply both frameworks to real-world financial advice scenarios.
3. Recognise the ethical tensions that arise when duties and outcomes conflict.
4. Develop a more nuanced and mature approach to professional ethics.
5. Reflect on their own decision-making processes and biases.