Our exhaustive library of resources and guidelines designed to help professionals maintain a sterling reputation founded on trust, ethics, and best practices.
Under new rules effective May 16, 2016, the public can now invest in early-stage start-ups via online platforms that are subject to registration and disclosure requirements. For their part, consumers are limited in how much they can invest based on their income and net worth. The U.S. government permitted crowdfunded investing as part of its Jumpstart Our Business Startups (JOBS) Act and the SEC’s enabling “Regulation Crowdfunding.”
The financial-services industry has a perennial consumer-trust problem. Year after year, studies show that consumers don’t trust financial institutions or financial advisors to do what’s right. A recent survey reveals that consumer mistrust of the financial-services industry slipped even further in 2016.
You probably know this already. But allow us to remind you of the zeal with which attorneys target financial advisors who mess up. Here are six of their typical marketing strategies.
We’ve said it before, but we’ll say it again. The vast majority of ethical/legal problems advisors encounter are self-inflicted. Sophisticated, large Ponzi schemers are outliers. Much more common are advisors who a.) make unforced errors through inattention or sloppiness or b.) aren’t well grounded in principle.
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?
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.
Several months ago, an agent approached us with an ethical concern. Formerly affiliated with a large FMO, he claimed its advisors were telling seminar attendees to expect a 4 to 6% return on their annuity purchases, despite the typical 2% payout with competing products. What’s more, he alleged the FMO was benchmarking its annuity contracts’ performance to a 3% bond and S&P 500. However, instead of illustrating a current, lower-yielding annuity, it compared those investments against a higher yielding annuity from more than ten years ago, strengthening the case to buy its offerings.
To the industry’s credit, firms terminated half of the offending advisors, the study reports. But 44 percent of those fired for misconduct wound up getting hired by another company that had an even higher rate of misconduct than their prior firm did. This suggests that some firms tolerate misconduct as a strategy to grow profits and that prior offenders in misconduct-tolerant firms are five times more likely to offend again.
Any life insurance agent should know how important it is to take every step necessary to strongly encourage and direct life insurance applicants to fill out the application completely and accurately — and to document your efforts in doing so.