Articles - National Ethics Association

Articles

Date: September 2018

Adviser Alert: Beware Reverse Churning, a Powerful Litigation Magnet

By: Harry J. Lew, NEA Chief Content Officer on September 12th, 2018 • Comments: 0

Have you moved a lot of your clients from commission-generating accounts to fee-bearing advisory arrangements, also known as wrap accounts? Are you expecting a major correction to hit the markets in the coming months or years? Then it’s time to protect yourself against a surge of so-called “reverse churning” errors and omissions lawsuits.

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Want to become a force for good in business?
Then commit yourself to treating your customers right.
Taking the National Ethics Association Business Integrity Pledge is a great first step.

I will always commit myself to protect and promote the interests of my customers, and will always conduct myself in a way that reflects well on my profession.
I will be totally honest when explaining my education and business background, professional licenses, and years of industry experience.
I will be completely truthful by not exaggerating the features and benefits of my products and/or services.
I will always disclose the important features of a product, transaction, or service and disclose potential risks that may negatively affect future performance or value.
I will always consider both my customer’s current and future needs to determine the proper suitability of any recommended products or services.

I will respect the confidentiality of any information entrusted to me or obtained in the course of my business or professional activities.
I will only use sales presentations and advertising materials that are completely accurate and compliant with state and federal regulations.
I will always provide my clients with copies of all required documents that relate to the product, transaction, or service that I have recommended to them.
I will always refer my clients to a more specialized professional or firm when their needs go beyond my current license or expertise.
I will consistently educate myself as to the new laws and regulations in my industry, and I will always act in good faith toward those I serve.

Want to become a force for good in business? Then commit yourself to treating your customers right. Taking the National Ethics Association Business Integrity Pledge is a great first step.

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Want to become a force for good in business?
Then commit yourself to treating your customers right.
Taking the National Ethics Association Business Integrity Pledge is a great first step.