What is a defining characteristic of conflicts of interest in financial services?

Conflicts of interest in financial services arise when a professional's interests diverge from the best interests of their clients. A defining characteristic of such conflicts is the potential gain at the expense of the client. This means that the professional may prioritize their own financial incentives or benefits over what is most suitable for the client, leading to a situation where the client's needs are not the primary focus.

For example, if a financial advisor receives higher commissions for selling certain products, there may be a temptation to recommend those products even if they are not in the client's best interest. This scenario illustrates how personal gains can compromise the client's well-being, highlighting the essence of a conflict of interest.

The other options do not accurately capture the nature of conflicts of interest. Exclusive benefits to the client do not pertain to conflicts; they represent ideal client-service scenarios. Promoting competition among clients lacks direct relevance to conflicts of interest, as it suggests a healthy market condition rather than a conflict. Lastly, adherence to ethical guidelines without exceptions might suggest maintaining professionalism; however, conflicts of interest often arise precisely when individual interests overshadow ethical guidelines.