Building trust is a crucial part of selling. It’s all about helping prospects answer two questions. First, has a financial advisor behaved unethically in the past, suggesting a flawed character? And second, is the person still engaging in unethical practices today, indicating a threat of current fraud?
Prospects must answer both questions in order to get comfortable with a prospective advisor. How can you help them? By understanding that what’s really important here is being transparent (the first question) and becoming a fiduciary (the second).
But let’s go even further. Since many advisors today are focusing on transparency and on putting clients first, you must do and say something dramatically different to set yourself apart. Here’s how:
- Buy a background check on yourself so that consumers cannot question your level of transparency.
- Make a compelling gesture that says you’ll never, ever put your own interests ahead of the client’s.
So why order a background check on yourself? Because the standard transparency strategies only take you so far.
Sure, you want to discuss your background extensively on your web site. And you want to increase your online exposure by building a LinkedIn page, along with personal profiles on sites such ethics.net (provided by the National Ethics Association). And you need a compliant business brochure, with ethics and confidentiality statements front and center (and on your web site, too).
But again, these are expected strategies. The only way to convince a consumer that you walk the talk is to let your record speak for itself—by sharing the results of a comprehensive background check.
What should a reputable background-search cover? Here are the main elements:
- A county criminal record search, for both criminal and misdemeanor criminal cases. (Beware firms that claim to have one national criminal records database; there is no such thing).
- A federal criminal records search, for cases involving violation of federal laws, often crossing state lines.
- A sex-offender registry search, for cases involving sex crimes.
- A civil-action search, for lawsuits and bankruptcies that reflect on your fitness to advise on financial matters.
Assuming you pass, it’s time to communicate your background check to prospects. Here’s how:
- Feature the results on all sales and marketing tools (check with your compliance officer first).
- Say that you are background checked on your online profiles.
- Provide a hard-copy report during initial sales meetings.
- Say that you voluntarily offered to be background checked (crucial, since it suggests you have nothing to hide).
If you do all of the above, you will have more trust and be positioned to close the sale. However, this only gets you 50 percent of the way to trust. Earning the remaining 50 percent requires either becoming a fiduciary or acting as one.
What’s a fiduciary? It’s someone who places the client’s best interests first. According to the Certified Financial Planner Board of Standards, a fiduciary “ acts in utmost good faith, in a manner he or she reasonably believes to be in the best interests of the client.” This also requires:
- being loyal to your clients,
- offering prudent advice,
- and avoiding (and disclosing) conflicts of interest.
In recent years, many life insurance agents have earned their Series 65 or 66 investment-advisory licenses (RIA). Their goal has mainly been to acquire the legal right to review client investments in order to source funds for annuity purchases. But many have failed to realize that a Series 65 or 66 imposes a fiduciary standard of care. Are you fulfilling that standard or just using your investment-advisor license to grease your current business model?
And consider this: True fiduciaries treat their clients as if they were their parents. If you were advising your father and mother about their retirement-income strategy, would you just recommend they buy a suitable annuity? No, you’d try to find the best possible solution (annuity or any other financial vehicle) that generates the income they need. Doing less would violate your fiduciary duty.
Now, if you are not an RIA, that’s OK . . . consider adopting a fiduciary mindset within the framework of your existing license. In practice, this means you’ll operate under a suitability standard, but try to exceed that standard whenever possible.
Either way, you must now convince clients you take your fiduciary obligations seriously. These pointers should help you:
- Disclose your standard of care in writing during the initial prospect meeting.
- Do comprehensive fact-finding so you know what your client’s best interests are, even if it takes multiple meetings.
- Disclose how you’re paid so the client knows exactly what you stand to gain.
- Tie your recommendations to client needs, supporting them with facts.
- When appropriate, surprise the person by recommending an action that doesn’t immediately benefit you (example: recommending a cash equivalent rather than a commissioned product).
- Commit yourself to ongoing professional development, ideally by studying for a ChFC, CFP, or other rigorous financial-services designation.
If you follow our recommendations—get background checked and become or act as a fiduciary—your clients will likely reward you with their trust, faster than ever before. And you will build a loyal and profitable client base. What else can you ask for?
For more information about ethical sales practices, please visit the National Ethics Association’s Ethics Center at ethics.net. For information on affordable errors-and-omissions insurance for low-risk financial advisors, please visit EOforLess.com.