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Regulation and Compliance > State Regulation

Eliminate Bad Sales Habits That Cause Compliance Headaches

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We all have them–habits that we have developed over time that we know we should change, but can’t. Perhaps it was because we learned to do something one way when we first started out in the business and it has stayed with us ever since. Or, perhaps it reflects an aspect of our personality. For whatever reason, we do things that we know may create problems.

When it comes to the sales process, producers often get tripped up by their habitual way of doing things. When it is pointed out to them, they acknowledge that they know they have a problem, but that’s just the way they do it. There are some bad habits common to producers that can lead to compliance problems. The following are some you may find familiar.

Rush, rush, rush

Some producers always seem to be in a rush at the end of the sales process. They rush through completing the application and other forms. The compliance problem that this creates is that the clients should understand what they are signing and by rushing through the process, they may not. Complaints from clients that they never understood what they were signing are common. Producers should explain the meaning of any disclosures rather than simply asking clients to sign and saying that this is “just some paperwork the home office makes us do.”

Make policy delivery short and sweet

Some producers deliver the policy, say thank you and then goodbye. They don’t use the policy delivery interview to review the reason the client bought the policy and to explain again how it operates. Some figure they did it all on the first one or two interviews and that the client would be bored by any additional explanation.

Doesn’t the client remember what the producer said during the interview? Wasn’t all that covered in the sales material the producer left behind after the interview? Isn’t that what the prospectus was intended to do? A problem with making the policy delivery too brief is that the producer may forget to explain fully any state mandated “free look” provisions. That can be a serious oversight.

Producers who do not use policy delivery as an opportunity to reacquaint the client with the reasons they purchased the policy and how it operates are betting that the client already fully understands. That isn’t the safest bet. A good habit to get into is to review what was sold, why it was bought and how it operates on the policy delivery interview. Discuss the policy “free look” period and explain how the client can return the policy. Then, document that this was done.

The prospectus tells the story

Some producers assume that handing out a prospectus is all they have to do to meet the requirements of disclosing information about a registered product to the client. Though that’s what a prospectus is supposed to do, it often is so lengthy that it deters the client from digging into it to find answers to his or her questions. A client who could wade through the legalistic language would probably get a good education about how the product operates. However, how many do that?

Relying solely on the prospectus to set the right expectations is not a good idea, yet many producers spend too little time explaining a registered product. The time spent discussing a product’s details will save time later on dealing with complaints due to misconceptions. A good habit to get into is to use the prospectus and any other company brochures to help explain how the product operates.

Oldies, but goodies

Some producers rely on the sales materials they have come to know and love, regardless of how old they are. Producers gravitate to particular sales material and they fail to change when that material gets out of date. They don’t throw out the sales material because it is familiar. However, sales material does get out of date. Companies update their materials. Materials that are out of date are no longer approved. Using unapproved sales material is a serious compliance problem. Keeping sales material up-to-date and throwing out old materials may be annoying, but it is a good habit to get into.

Excuse this place, it’s a mess

Producers sometimes have a bad habit of not keeping organized files and offices. They procrastinate about their paperwork. They also are busy and may find it difficult to do the administrative work needed to have orderly and up-to-date files. However, this bad habit can create compliance problems. If forms are misfiled or lost, producers may not have the information needed to answer a compliance-related question. They may not have the information needed to defend themselves against a complaint. They may not be prepared for an unannounced compliance audit by their broker-dealer. A prudent producer either gets into the good habit of keeping his files and office organized and up-to-date or gets someone else to do it for him.

Dennis Groner, Ph.D., CLU, ChFC, is a principal in Groner & Associates, a management training and development consulting firm. He can be reached via e-mail at [email protected].


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