Damned either way. It’s long been a legitimate complaint from responsible advisors about the confusing nature of the ever-increasing regulatory environment. In criminal proceedings, ignorance of the law is no defense, but ignorance is hardly the case here. Rather, the sheer volume of required policies and procedures makes it tough for even the most ethical of advisors to keep up.
We recently heard of an advisor sanctioned in one state for choosing a particular course of action, while a colleague with the exact same set of circumstances in a neighboring state was sanctioned for not choosing the same course of action. We have a feeling most advisors wouldn’t find it surprising, hence our opening quip. While adherence to new regulations leaves little room for error, the outcome and resulting sanction is too often left to the whims of a particular state, or worse yet, the attitude and experience of a particular investigator.
Our point certainly isn’t to whine, but rather to illustrate the increasingly accepted adage that advisors are responsible not only for the decisions they make, but the decisions they don’t make, and that applies to the products and services offered. Here’s what we mean:
The first thing any new insurance agent learns is that if a risk is not specifically listed in the “exclusions” sections of a policy, it’s covered. It’s therefore the first place they look if a question arises about a claim. It makes for an incredibly high standard, as carriers must consider every risk possible when developing a product. For better or worse, agents and advisors are increasingly held to that seemingly impossible standard.
Long-term care insurance is one example, and a recent spate of high-profile lawsuits involving the products makes it easy to relate. Certain advisors have traditionally shied away from the product due to its perceived high-cost, recommending a self-funding strategy for clients instead. It’s their prerogative to feel that way, whether or not it’s accurate. Yet their bias is no longer allowed to impact the client. Even if they don’t feel the product is right for a given situation, it still must be nonetheless raised for the client to accept or reject. It’s a difficult standard, to say the least, but the lawsuits successfully brought by plaintiffs’ attorneys against advisors after the fact means the precedent is set.