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Good Business: 20 More Tips for Lowering Your E&O Risk

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By the National Ethics Association

As a financial advisor, you’ve no doubt read a compliance manual or three in your time. These documents are typically rule-driven, which means they can be long and dense to work with. The good news: You can also lower your errors-and-omissions insurance risk by adopting ethical values and business practices. This article (Part 3) provides 20 more quick pointers for doing just that. Watch for more parts in the coming weeks.

Tip #41- Resolve Complaints Quickly
Try to resolve complaints as quickly as possible. If you know how to fix matters, commit to doing so ASAP. If you don’t, promise to learn how within a certain number of days.

Tip #42 - Take Responsibility
When a client is unhappy with you, “own” the complaint and commit to a fair outcome. You will more likely retain the client long term.

Tip #43 - Watch Out for Trinkets
The more financial-services companies offer you “trinkets” to sell a product, the less likely the product will be truly great for your clients.

Tip #44 - What to Look for in an FMO
Products, marketing tools, and sales support are all well and good. But what’s most important is a commitment to ethics.

Tip #45 - Focus on the Right Clients
Make sure prospects match your client profile. This will help you avoid problems and do the work you most enjoy.

Tip #46 - Evaluate Referrals
Don’t feel obligated to work with all referred prospects. You may end up out of your comfort zone. However, encourage your network to refer prospects who do match your target profile.

Tip #47 - Screen All Prospects
When you first meet a prospect, determine “fit.” Ask open-ended questions and listen carefully to the person’s answers, body language, etc.

Tip #48 - Leaving Clients
If a client no longer fits your profile, it’s best to resign the account. But try to help the person find a more appropriate advisor.

Tip #49 - Watch for Problem Clients
If a client is overly needy, abrupt, or annoying early in your relationship, chances are he or she will get worse latter. Take appropriate action now.

Tip #50 - Keep the Promise
As a financial advisor, keeping promises is crucial to your success.

1. Never promise something you can’t deliver
2. Always under promise and over deliver.
3. View your client promises as a sacred trust.
4. Get better organized so you don’t forget the promises you made.

Tip #51 - Do What’s Right; Money Will Follow
Don’t let commissions color your professional judgment. If you do what’s right for your clients, you’ll always earn more than enough money.

Tip #52 - Don’t Conceal Negative Facts
Make sure clients know the significant downsides of every product you recommend. Full disclosure is always a winning strategy.

Tip #53 - Don’t Call Yourself a Financial Planner
If you’re an insurance salesperson, don’t hold yourself out as a investment advisor. Earn an appropriate RIA license first.

Tip #54 - Get Serious about CE
Don’t leave your CE courses to the last minute. Give yourself enough time to really learn something.

Tip #55 - Pursue Lifelong Learning
Make a “life list” of important books you want to read. Or pick a hobby you want to pursue and master. Or start learning a foreign language at your local community college. The point is to keep learning. This will help you to become more adept around people and more skilled at identifying and resolving problems.

Tip #56 - Don’t Recommend Securities Online
This may trigger FINRA’s Rule 2310 (on suitability), requiring prior approval and additional disclosures.

Tip #57 - Watch Your Online Comments
Make sure your anything you post online complies with FINRA’s content standards (fair, balanced, etc.).

Tip #58 - Treat Your Facebook or LinkedIn Profiles as Advertising
This means they need to be submitted for broker-dealer review before posting.

Tip #59 - Don’t Solicit LinkedIn Testimonials
If you’re an RIA representative, don’t ask your clients for testimonials. It’s illegal.

Tip #60 - Disclose Carrier Information
Be sure to disclose full information about the issuing company, including ratings and track record.

For more information on reducing your errors-and-omissions insurance liabilities, please visit our E&O Headquarters at EOforLess.com (financial professionals only). For more information on ethical selling practices, visit National Ethics Association’s Ethics Center.

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