There are five fundamental principles to protect your practice from compliance claims and to grow your business at the same time, writes Thomas Hines and John Brubaker. In their book, “NASD Arbitration Solution,” they outline five principles advisors need to live and work by to guard against claims.
Humility — A humble advisor can approach clients with an open mind. Admit your mistakes and talk your clients through their decisions to clarify any misconception about possible outcomes. The authors recommend not using the word “never” when conveying unlikely events. Instead, make risks clear by saying “The chances of that are extremely remote.”
Integrity — If you focus on your character, your reputation will reflect that effort, the authors write. Don’t gloss over the risks involved in a product or strategy. Set account minimums and walk away from clients who are bad for your practice.
Duality — There are two sides to every story; it’s your job to see both, the authors opine. When a client wants to change his or her portfolio, consider all the circumstances and show the client the different outcomes they could face. Document the discussion and share a copy of those notes with the client.
Awareness — You should know all you can about your client, but don’t let your knowledge of the industry falter. Keep up with industry trends and continuing education. Sometimes your knowledge will lead you to break with tradition, the authors write.
“All clients have their own unique circumstances and personalities. If we know them as well as we should, we will be able to make the occasional intuitive decision that is the right one.”
Dedication — Passion for your business is key to a long-running practice. Focus on self-improvement by taking advantage of coaching programs and network with other dedicated, goal-oriented advisors.