Reputation is as delicate as a butterfly’s wings. It follows that a small event distantly related to your business can have a huge impact on your reputation. You may recognize this as the “butterfly effect” — named after the theoretical possibility that a butterfly flapping its wings in Belize can generate
a tornado in Texas.
Advisors are always launching their own butterfly effects. They make decisions about what products to sell, which FMOs or broker-dealers to affiliate with, what selling systems to use, etc.
According to chaos theory, which underlies the butterfly effect, one such decision can produce potentially devastating consequences. Here are events relating to advisors hiring lead-generation firms, each with unforeseen negative effects on their reputation:
Case No. 1: A direct-mail firm suggests the end is near for Social Security in a business-reply card mailer to the senior market.