How to Vaccinate Your Practice Against Lawsuits

2. Plug the information gaps.

Getting everything necessary to guide your clients to a successful financial outcome can be challenging. Nearly every advisor or agent has one or two clients who make getting complete and accurate information more difficult than pulling teeth.

It's tempting to go ahead with the transaction when an interview, document, or record is missing. However, giving advice based on partial data is potentially risky. You must make it a habit to tell clients that your advice is contingent on them providing you with complete information.

Clients must understand that you can't (and won't) help them unless they give you everything you request.

Restrict the scope of your interactions with these types of clients and prospects until you have everything.

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3. Make certain client data is stored and protected correctly.

According to some recent university research, there’s a cyber attack every 39 seconds. As an agent or advisor, you are automatically prone to attacks from criminals seeking accounts to drain.

Ensure you have a solid digital security plan in place and a Plan B when an attack occurs. Many advisors have seen their nonchalant attitudes toward data protection and privacy result in painful legal actions.

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4. Gain a precise and accurate picture of each client's risk tolerance.

Fully disclose every potential risk your particular methodology or recommended products might incur.

Clients must know about potential conflicts of interest and understand your methods of determining suitability.

Only when your client knows everything is it a good time to deep dive into their risk tolerance.

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5. Avoid "high maintenance" clients altogether.

Great communication with prospects and clients means that you can be more selective. You probably want to avoid anyone who always seems embroiled in some family drama or is deceptive or evasive about their money.

You are likely to regret snagging a temperamental, demanding client, even if they are high-net-worth. These clients are also much more prone to sue when things don't go as they expected.

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