Suitable Sales Spell “Low Business Risk”



Would a surgeon recommend an appendectomy to fix your pesky gallbladder?

Would an accountant propose amending your taxes when what you really needed was to file an extension?

Would an attorney recommend that you sue somebody when you just needed a new will? (Sorry, this one’s arguable, but please read on.)

These are outlandish examples. But they illustrate a key point: True professionals make suitable recommendations to their clients. If they begin recommending products or services that serve other agendas, they no longer are true professionals.

“Suitability” implies a financial advisor has listened to a client’s desires, personal resources, and constraints. It also implies the professional’s recommendations fall within generally accepted standards of practice. Finally, it implies the person serves the customer’s agenda, not his or her own.

Insurance agents, financial planners, investment advisors—none of these is a professionals in the classic sense (doctor, attorney, and accountant). But they must subscribe to the same “suitability” philosophy those professionals share. To do otherwise is foolish. It invites client complaints, lawsuits, and, ultimately, errors-and-omissions insurance claims.

Sadly, some in business today have pushed the suitability envelope, if not broken through it entirely. We’ve all read of cases where advisors have sold products and services to people who don’t need them . . . just to make a buck. Worse, sometimes they sell products to customers that are grossly inappropriate to those people’s needs. This is not only wrong, but it makes absolutely no sense from a business-building perspective, let alone an errors-and-omissions perspective.

If you were truly serious about building a successful business, why would you sell inappropriate products and services? Yes, you’d increase revenue in the short term. But over the long haul, you’d run the risk of creating unhappy customers who will be more than happy to share their negative opinions about you with others. Doing business this way is like building a house on a foundation of sand. It saves money in the short run, but sets the stage for a future collapse. Unless you enjoy getting sued—and filing errors-and omissions insurance claims—just don’t do it!

The better approach: Get serious about suitability. Don’t give regulators any more ammunition. Recommit yourselves to carefully figuring out what customers need. Always document the needs you hear expressed. Get super-familiar with the products you sell and what’s available elsewhere. Think long and hard before you recommend products and services to your clients. In short, just do what’s right.

And when all else fails, just say no to unsuitable sales. Your good name—and the survival of your business—depends on it.

Reduce your business risk by getting affordable E&O today.
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