Tip #1: Be a Consummate Professional.
There is no short cut to professionalism. Do your homework and know what you’re recommending. Keep investing in your knowledge base by earning appropriate designations and attending professional development courses. Stay current on regulatory requirements.
Tip #2: Do Your Own Due Diligence.
Never delegate due diligence to any other person or company. Make sure to investigate the financial standing of all companies whose products you are selling. Plus, make sure all products and investment programs you offer are registered with the appropriate regulatory authority.
Tip #3: Stay In Your Expertise Area.
Only recommend products you fully understand and are licensed to sell. If you refer clients to other providers, make sure you can vouch for their competence and integrity.
Tip #4: Solicit Business Properly.
Make sure your solicitation materials are above board. You never want to misrepresent who you are, what you do, or what you sell. And if required to, have your insurance company and/or broker-dealer approve your solicitation materials.
Tip #5: Practice Full Disclosure.
Make sure to disclose all required information and be totally up front about your track record, business practices, and affiliated advisors and companies.
Tip #6: Do Thorough Fact-Finding
When you first meet the client, take time to fully understand the person’s situation. Uncover and document all relevant facts. Do a careful job of assessing risk tolerance. Then set appropriate expectations for future results.
Tip #7: Link Your Recommendations to Documented Needs
Make sure to present only suitable recommendations (preferably more than one). After the prospect agrees to buy, review the reasons for buying the product and get the prospect to agree in writing.
Tip #8: Educate Clients about What They Bought.
Make sure clients understand what their product covers and doesn’t cover, as well as all moving parts, fees and expenses, and any underlying risks and guarantees. You can never over-educate a client.
Tip #9: Leave a Paper Trail.
This is crucial. Always document the outcomes of key client conversations, decisions made, and coverages declined. And remember, no client interaction is irrelevant. Document every call or conversation no matter how trivial the subject matter. Doctors and attorneys do this, and so should you.
Tip #10: Promptly Resolve Client Issues.
If a client is unhappy with you, find out why. Then do your best to resolve the person’s concern before it turns into a formal complaint or lawsuit.
Bottom line: Preventing future E&O insurance claims isn’t rocket science. But it does require careful planning, attention to detail, and commitment. The ten tips just described will get you started. The rest is up to you.
For more information on affordable errors-and-omissions insurance for low-risk financial advisors, please visit EOforLess.com. For information about ethical sales practices, please visit the National Ethics Association’s Ethics Center at ethics.net.