Today more than ever, financial advisors are required to demonstrate the basis for their investment analysis, recommendations, and transactions. Without a systematic method for documenting and storing your work, you will be at the mercy of overzealous regulators and unscrupulous litigators. In fact, it’s not enough to have files; they must be complete and demonstrate a timeline consistent with your activities. That means you can’t go back and rebuild them after the fact. Are your product/sponsor files inadequate? Don’t worry! Resolve to do better in the future . . . and start right now!
Advisors often find themselves scrambling to buy the coverage they need under severe time constraints, which leads them to make a cursory rather than careful buying decision. And this can result in surprises later when their insurer fails to provide coverage for an excluded loss. To protect yourself, read the specimen policy fully and study its definitions carefully. Even though you’re really busy, the time you spend on this will be time well spent.
As a financial advisor, you probably know a great deal about insurance. Consequently, you understand why life and health insurers must exclude certain losses in order to preserve company solvency. But what about the errors-and-omissions insurance you buy for your firm?
We’ve seen how easy it is for advisors to get distracted from the core values and ethical practices that produce long-term success. They focus on seeing more prospects, closing more sales, cross-selling more products, racking up more conference credits, graduating to a nicer office, buying a more luxurious home, etc. There’s nothing wrong with wanting those things. But remember that they are results, not root causes.
Financial advisors who have noticed cognitive declines in older clients as well as irregularities in their financial statements face tough decisions. Should they raise a red flag with authorities and risk angering family members? And should they slow or stop a requested financial transaction when they suspect exploitation?
It will be years before the full impact of the Department of Labor’s new Fiduciary Rule is known. But it will begin affecting distinct sales channels in various ways, says Cyril Tuohy on InsuranceNewsNet.com. Here’s his analysis in a nutshell.
The Department of Labor’s new Fiduciary Standard has been dominating the headlines for months. This is totally expected, since the new regulation has the potential to fundamentally reshape how advisors sell products in the qualified retirement arena. But advisors who sell both qualified and non-qualified products, especially annuities, have many other compliance issues on their plates.
“Do unto others as you would like others to do unto you.” The so-called Golden Rule has guided human conduct since time immemorial. It was known in the Middle Kingdom of ancient Egypt (ca: 2000 B.C.), in Babylon, as expressed in the Code of Hammurabi, and in ancient Greece. It also appears in one form or another in most major religions. Why has this moral concept had such a large impact on humankind? Because it’s morally right—and pragmatically smart!
If you are a financial professional or business owner, you can’t outsource ethics. You alone are responsible for your ethical conduct. Whether you own a business or just work for one, these principles will help you avoid customer complaints, legal sanctions, and E&O insurance claims.
FINRA statistics reveal that 2,135 customers filed arbitration claims against securities brokers in 2015. FINRA also says that arbitration cases typically take about 14 months to resolve, with advisors liable for damages about 40 percent of the time. Now, does the prospect of worrying about a client dispute for 14 months, dealing with attorneys, having outsiders poke around in your business, and potentially incurring sanctions and fines sound appealing to you? I thought so. And I’m certain insurance-licensed producers and investment advisors would agree.