You’ve seen the articles. A financial professional makes a mistake and gets cited by the NASD, SEC or state regulator. A major newspaper catches wind, interviews the victims, and publishes a front-page story in print and online that shakes the industry.
In the pre-Internet era, such articles would hit the newsstand (remember those?), cause a furor, and then fade away. The producer and companies would lick their wounds and return to business as usual.
However, with the advent of the Internet and Google, such articles can be the kiss of death for one’s reputation and business.
Consider this: Whenever the media says something negative about you online, it will be available forever — to anyone, anywhere who knows how to use Google. Worse, your mistakes never die, even after you’ve paid your fine or done your time. They will remain visible as you solicit new clients, recruit new employees, or talk to prospective business partners — now and many years from now.
For these reasons, reputations today are eggshell fragile. As Warren Buffet has said, “It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you’ll do things differently.”
What to do differently? First, understand that reputation death has two causes:
- Either you screwed up and clients file complaints.
- Or they think you screwed up — even though you didn’t — and file complaints anyway.
In the first instance, you screwed up on purpose or just dropped the ball. In the second, you didn’t explain things well or manage client perceptions. In either case, client complaints (even one will suffice) invite regulators to scrutinize you — and publish your errors on their Web sites. If regulators provide the wood for your reputation’s coffin, the subsequent New York Times or Wall Street Journal articles will supply the nails.
Given these scenarios, here are some tips for safeguarding your reputation.
- Make sure you are in compliance with both the spirit and the letter of the law. Look at every aspect of your business and scrub it until it shines. Then scrub again.
- Operate with regulatory hyper-scrutiny in mind. If you need to pick up additional licenses to protect yourself, do it. Avoid sales practices that regulators are targeting.
- Communicate regularly with your clients. Set appropriate expectations with clients. Make sure all key decisions are documented, make frequent touch-based phone calls and conduct annual reviews.
- Always operate from a “fiduciary” perspective. Make recommendations based on what’s best for the client, not what’s best for you. You may earn commissions, but never recommend a product because it pays high commissions or bonuses. And never sell a product to qualify for a trip or toy.
- Tell your clients you’re not happy unless they are completely satisfied. Obtain their assurances that any dissatisfaction will be communicated to you first.
- The point is this: to safeguard your reputation, just do what’s right, tighten your procedures, and communicate better. Sure, it’s extra work, but consider the alternative.
*For further information or to contact this author, please use the forum below.