Don’t Let Bad Bosses Create E&O Nightmares, Part 2

In our prior article we discussed the challenge of working for (or with) “bad bosses.” We defined them as anyone who tries to “lead” you to success, including your IMOs, your carrier reps, and even your professional mentors. We also proposed that bad bosses come in two varieties: “black hats” and “gray hats.”

The problem with “black-hat” bosses is they have no qualms asking you to lie or break the law for them as long as it advances their interests. And when this happens, you must figure out how to do what’s right without necessarily quitting (and hopefully before they create an errors-and-omissions nightmare for you!) Our solution: think through such dilemmas using National Ethics Association’s SMART decision-making model.

But what about “gray hat” bosses, i.e., people who may not ask you to break the law or do anything grossly unethical, but who urge you to bend the rules? Yes, “gray hatters” can be challenging. They’re everywhere. Their arguments can be enticing. And once you give in, you might find yourself on a slippery slope leading to unsuitable sales and improper replacements.

Consider the case of Stuart, an advisor selling annuities, life insurance, and investments. Stuart started out as a captive agent, but opened his own shop five years ago, affiliating with a regional FMO. Although Stuart had broad expertise, his FMO rep, Aaron, always pushed him toward the “flavor of the month”: —a deal generating sweetners for the FMO and advisor, regardless of whether the client was optimally (and suitably) served.

Athough the FMO never asked the advisor to break the law or hype worthless products, he did pressure him to shoehorn clients into products that weren’t necessarily the best fit. In fact, he suggested that Stuart do less “fact-finding” (understanding the client’s entire financial situation) and more “close-finding” (looking for hot buttons to push in order to sell more “featured” products). Stuart didn’t mind making more money, but he was concerned giving in might lead to ethical or legal problems later. He was also concerned that cutting corners might lead to dissatisfied clients who might file errors-and-omissions complaints or lawsuits.

How would you advise Stuart? Should he deliver what the FMO wants and be happy with his larger commission checks? Or should he stand his ground in order to serve the client’s absolute best interests (and hopefully make a more suitable sale)?

As in the prior article in this series, we believe the answer depends on the advisor’s values and temperament. Since he’s dealing with a gray-hat boss now, making a SMART ethical decision is even more crucial. To that end, he should:

  1. Study his options carefully.
  2. Make a mental note of everyone affected by each option.
  3. Assess who benefits or suffers from each option.
  4. Reflect on whether he’d be able to live with himself after making each choice.
  5. Total up all the factors and reach a decision.

In this case, we’d add a final “S,” for “Set an ethical precedent.” Because standing your ground the first time means you don’t have to do battle every time, lowering your odds of ever getting sued.

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